BOARD MEETING

                        STATE OF CALIFORNIA

                        AIR RESOURCES BOARD









                      JOE SERNA, JR. BUILDING

            CALIFORNIA ENVIRONMENTAL PROTECTION AGENCY

              CENTRAL VALLEY AUDITORIUM, SECOND FLOOR

                           1001 I STREET

                      SACRAMENTO, CALIFORNIA









                     THURSDAY, MARCH 27, 2008

                             9:00 A.M.









    TIFFANY C. KRAFT, CSR, RPR
    CERTIFIED SHORTHAND REPORTER
    LICENSE NUMBER 12277


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                                                              ii

                            APPEARANCES



    BOARD MEMBERS

    Ms. Mary D. Nichols, Chairperson

    Dr. John R. Baums

    Ms. Sandra Berg

    Ms. Dorene D'Adamo

    Mr. Jerry Hill

    Mr. Ronald O. Loveridge

    Mrs. Barbara Riordan



    STAFF

    Mr. Tom Cackette, Chief Deputy Executive Officer

    Mr. James Goldstene, Executive Officer

    Mr. Bob Jenne, Acting Chief Counsel

    Mr. Michael Scheible, Deputy Executive Officer

    Ms. Lynn Terry, Deputy Executive Officer

    Ms. Kathleen Quetin, Ombudsman

    Ms. Lori Andreoni, Board Secretary

    Ms. Analisa Bevan, Chief, Sustainable Transportation
    Technology Branch, MSCD

    Mr. Bart Croes, Chief, Research Division

    Mr. Joe Calavita, Mobile Source Control Division

    Mr. Earl Landberg, Mobile Source Control Division


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                       APPEARANCES CONTINUED


    ALSO PRESENT

    Mr. Lydell Anderson

    Mr. Thad Balkman, Phoenix Motorcars

    Mr. Phil Baxley, Shell Hydrogen

    Mr. Adam Borelli, Google.org

    Ms. Sherry Boschert, Sierra Club of California

    Mr. Paul Buttner, California Rice Commission

    Mr. Tim Carmichael, Coalition for Clean Air

    Mr. Tom Carroll, Shasta Union High School District

    Mr. Robert Cassidy, Nissan

    Mr. Francois Choquette

    Mr. John Clements, Kings Canyon Unified School District

    Mr. Daniel Davids, Seattle Electric Vehicles Association

    Mr. Bill Davis, Southern California Contractors
    Association

    Mr. Besir Dunlap, EV Driver

    Mr. Ze'ev Dvori, Tesla Motors

    Mr. Stephen Ellis, American Honda Motors Co.

    Mr. Daniel Emmett, Energy Independence Now

    Ms. Jennifer Ehn, John Deere

    Mr. Ron Feund, EAA

    Mr. Dave Flanaghan, UTC Power

    Mr. Steven Flint, New Yort State Dept. Environmental
    Conservation

    Mr. Ted Flittner, 1 Ample World


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                       APPEARANCES CONTINUED


    ALSO PRESENT

    Mr. Tom Folks, Mighty Com

    Mr. Andrew Frank, UC Davis

    Mr. Jay Friedland, Central Coast EAA (Plug In America)

    Mr. Ron Freund, Electric Auto Association

    Mr. Marc Geller, SFEVA

    Mr. Warren Gifford

    Mr. David Greene, Oak Ridge National Laboratory

    Mr. Peter Greer

    Mr. Sigmund Gronich, Charisma Consulting

    Mr. Steve Heckeroth, ASES

    Mr. Karl Heinz Ziwica, BMW of North America

    Ms. Bonnie Holmes-Gen, American Lung Association

    Mr. Kirk Hunter, Southwest Transportation Agency

    Mr. Stuart Johnson, Volkswagen

    Mr. Rick Kasper, Global Electric Motorcars

    Mr. Richard Kelly

    Mr. Earl Killian

    Ms. Jamie Knapp, ZEV Alliance

    Mr. Ben Knight, Honda

    Mr. Doug Korthof

    Mr. William Korthof

    Mr. Joe Kubsh, Manufacturers of Emission Controls
    Association


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                       APPEARANCES CONTINUED


    ALSO PRESENT

    Ms. Camille Kustin, Environmental Defense Fund

    Mr. Allan Lind, CCEEB

    Mr. Michael Lord, Toyota

    Mr. Ralph Meza, Fresno Unified School District

    Mr. Fred Minassian, South Coast AQMD

    Mr. Matt Miyasato, SCAQMD

    Mr. Dave Modisette, CA Electric Transportation Coalition

    Mr. Reg Modlin, Chrysler

    Ms. Linda Nichols, Plug In America (Rain Forest Action
    Network)

    Mr. Bernie Orozco, Sempra Energy

    Mr. Chris Paine

    Mr. Bill Pascarella

    Mr. David Patterson, Mitsubishi

    Ms. Cynthia Verdugo-Peralta, Asthma and Allergy Foundation
    of America

    Mr. Marcus Platt, Boatswain's Locker

    Mr. Norman Plotkin, CAWA/AAIA

    Mr. Walter Puentz, Mercedes-Benz

    Mr. Spencer Quong, Union of Concerned Scientists

    Mr. Bill Reinert, Toyota

    Mr. Randy Reisinger, CalCars

    Mr. Gary Rohman, ECCO Equipment Corporation


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                       APPEARANCES CONTINUED


    ALSO PRESENT

    Ms. Lisa Rosen

    Ms. Sara Rudy, Ford Motors

    Mr. Robert Sawyer, UC Berkeley

    Mr. Paul Scott, Solar City

    Ms. Chelsea Sexton, Plug In America

    Mr. John Shears, Center for Energy Efficiency and
    Renewable Technologies

    Mr. Adam Smith, Google.org

    Mr. Jay Smith

    Mr. Andrew Simpson, Tesla Motors

    Mr. Luke Tonachel, NRDC

    Mr. Leonard Tramiel

    Mr. David Turock

    Ms. Joy Turock

    Mr. Dave Underwood, Plug Power

    Mr. Alan Weverstad, General Motors

    Mr. James Woolsey

    Mr. Aki Yasuoka, Honda


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                                                              vii

                               INDEX
                                                          PAGE


    Item 080-3-1
         Chairperson Nichols                                3
         Executive Officer Goldstene                        4
         Staff Presentation                                 4
         Q&A                                                9


    Item 08-3-5
         Chairperson Nichols                               10
         Executive Officer Goldstene                       14
         Staff Presentation                                15
         Board Member Comments                             45
         Motion                                            47
         Mr. Greene                                        60
         Mr. Gronich                                       64
         Mr. Cassidy                                       66
         Mr. Flanaghan                                     68
         Mr. Kelly                                         71
         Mr. Simpson                                       74
         Ms. Rudy                                          77
         Mr. Frank                                         79
         Mr. Killian                                       82
         Mr. Geller                                        84
         Mr. Gifford                                       87
         Mr. Reinert                                       89
         Mr. Lord                                          93
         Mr. Flint                                         96
         Mr. Woolsey                                       99
         Mr. Miyasato                                     102
         Ms. Sexton                                       105
         Mr. Underwood                                    108
         Mr. Paine                                        111
         Mr. Friedland                                    114
         Mr. Greer                                        117
         Mr. Freund                                       119
         Mr. Plotkin                                      122
         Mr. Knight                                       124
         Mr. Modisette                                    127
         Ms. Holmes-Gen                                   131
         Mr. Sawyer                                       136
         Mr. Emmett                                       139
         Ms. Knapp                                        143
         Mr. Davids                                       145
         Mr. Modlin                                       147
         Mr. Kasper                                       150
         Mr. Ellis                                        152


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                          INDEX CONTINUED
                                                          PAGE
         Mr. Scott                                        154
         Mr. Dvori                                        157
         Mr. Smith                                        159
         Mr. Weverstad                                    163
         Mr. Reisinger                                    165
         Mr. Yasouka                                      167
         Mr. Flittner                                     169
         Mr. Turock                                       173
         Mr. Smith                                        174
         Mr. Quong                                        175
         Mr. Tonachel                                     179
         Mr. Shears                                       182
         Mr. Choquette                                    185
         Mr. Turock                                       187
         Mr. Johnson                                      190
         Mr. Korthof                                      191
         Mr. Pascarella                                   195
         Mr. Puetz                                        197
         Ms. Rosen                                        200
         Mr. Tramiel                                      202
         Mr. Heinz Ziwica                                 203
         Mr. Patterson                                    205
         Mr. Balkman                                      208
         Mr. Dunlap                                       209
         Ms. Nichols                                      212
         Mr. Anderson                                     214
         Mr. Korthof                                      216
         Ms. Boschert                                     218
         Mr. White                                        221
         Mr. Carmichael                                   224
         Mr. Baxley                                       226
         Mr. Heckeroth                                    230
         Ms. Verdugo-Peralta                              233
         Mr. Folks                                        237
         Board discussion                                 240
         Vote                                             299

    08-3-3
         Chairperson Nichols                              301
         Executive Officer Goldstene                      302
         Staff Presentation                               305
         Mr. Minassian                                    318
         Mr. Buttner                                      320
         Mr. Lind                                         321
         Mr. Davis                                        324
         Mr. Rohman                                       333
         Mr. Platt                                        335
         Ms. Ehn                                          337


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                          INDEX CONTINUED
                                                          PAGE

         Mr. Carmichael                                   338
         Ms. Kustin                                       340
         Q&A                                              342
         Motion                                           344
         Vote                                             346


    08-3-4
         Executive Officer Goldstene                      346
         Staff Presentation                               348
         Mr. Meza                                         365
         Mr. Rhoads                                       366
         Mr. Clements                                     370
         Mr. Hunter                                       373
         Mr. Carroll                                      375
         Mr. Orozco                                       378
         Mr. Kubsh                                        378
         Mr. Carmichael                                   381
         Ms. Holmes-Gen                                   383
         Mr. Minassian                                    385
         Motion                                           387
         Vote                                             391
         Q&A                                              392

    Public Comment
         Mr. Korthof                                      406
         Mr. Rohman                                       409
         Mr. Davis                                        411
         Mr. Hogo                                         415


    Adjournment                                           418
    Reporter's Certificate                                419


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                                                              1

 1                          PROCEEDINGS

 2           CHAIRPERSON NICHOLS:  Good morning.  Ladies and

 3  gentlemen.  This is the March 27th public meeting of the

 4  Air Resources Board, and I'll ask that we all come to

 5  order here.

 6           We are expecting a large crowd for the next item

 7  on our agenda, but we're going to get started first as we

 8  do every month with a briefing on an update on research.

 9  So before we get into the regular meeting, we will begin

10  with the Pledge of Allegiance and I'll ask everybody to

11  stand and face the flag.

12           (Thereupon the Pledge of Allegiance was

13           recited in unison.)

14           CHAIRPERSON NICHOLS:  The clerk will please call

15  the roll of the Board.

16           SECRETARY ANDREONI:  Dr. Baums?

17           Ms. Berg?

18           BOARD MEMBER BERG:  Here.

19           SECRETARY ANDREONI:  Ms. D'Adamo?

20           Supervisor Hill?

21           SUPERVISOR HILL:  Here.

22           SECRETARY ANDREONI:  Ms. Kennard?

23           Mayor Loveridge?

24           BOARD MEMBER LOVERIDGE:  Here.

25           SECRETARY ANDREONI:  Ms. Riordan?

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                                                              2

 1           BOARD MEMBER RIORDAN:  Here.

 2           SECRETARY ANDREONI:  Supervisor Roberts?

 3           Professor Sperling?

 4           BOARD MEMBER SPERLING:  Here.

 5           SECRETARY ANDREONI:  Chairman Nichols?

 6           CHAIRPERSON NICHOLS:  Here.

 7           SECRETARY ANDREONI:  Madam Chair, we have a

 8  quorum.

 9           CHAIRPERSON NICHOLS:  Thank you.

10           I have a couple of announcements before we begin.

11  First of all, we have listed on our agenda for today a

12  closed session to be briefed on litigation.  That will not

13  occur.  There will not be a closed session today.

14           If there's anybody in the audience now or

15  listening who is not familiar with our procedures, we ask

16  everyone that wishes to testify on any item to sign up

17  with staff.  We have tables outside the auditorium today,

18  and you have the option to include your name on a speaker

19  card if you wish.

20           In order to give everybody a chance to speak we

21  set up two podiums today.  We'll be using both of them.

22  We're going to be alternating between the podiums, and

23  staff will be available to help people line up so we can

24  manage the large numbers that we are expecting for the

25  next item.  I'll probably make this announcement again

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                                                              3

 1  later.

 2           We're also going to be strictly imposing the

 3  three-minute time limit, and there will be a buzzer that

 4  will go off.  Instead of the gentle lights, we'll be using

 5  the sound system.  So people will really know when their

 6  time is up.  And I'll talk more about how we'll deal with

 7  this later.

 8           Finally, I need to announce there are emergency

 9  exists at the rear of the room.  If there should be a fire

10  drill or an actual emergency, people are to exit through

11  those doors and go out into the street and return when we

12  get the all-clear alert.

13           So with that, I think we can turn to our health

14  update.  And this is an opportunity for the Board to hear

15  about some of the latest research findings on the health

16  affects of air pollution.  Today, staff is going to be

17  presenting a first paper that has addressed the issue of

18  wild fire smoke on respiratory health of children.  I'm

19  sorry that Supervisor Roberts isn't here for this one.

20  But I know he has an excused absence today.  We all make

21  sure he's updated on this as well since this was a huge

22  issue in his district a few months ago when we had serious

23  fires there.

24           So Mr. Goldstene, would you please introduce the

25  item?

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 1           EXECUTIVE OFFICER GOLDSTENE:  Thank you, Chairman

 2  Nichols.

 3           As Californians, we know that wild fire season is

 4  of concern for multiple reasons, including threats to

 5  property, national resources, and public health.  Few

 6  studies have investigated the relationship between adverse

 7  health effects and exposure to wild fire smoke.

 8           This morning, staff will present the results of a

 9  recent paper that investigated children's respiratory

10  systems during a group of major wild fires in southern

11  California in October 2003.

12           Dr. Deborah Drechsler from our Health and

13  Exposure Assessment Branch will make the presentation.

14  Dr. Drechsler.

15           (Thereupon an overhead presentation was

16           presented as follows.)

17           DR. DRECHSLER:  Good morning, Chairman Nichols

18  and members of the Board.  As we all know, one of the

19  perils of living in California is the wild fire season

20  which effects air quality in addition to other more direct

21  effects.  There have been several published studies on the

22  health impacts of specific wild fires, but the results

23  have not been consistent.  The impacts of any fire are

24  unique to that event and are influenced not only by the

25  magnitude, intensity, and duration of the fire, but also

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                                                              5

 1  by the extent to which the smoke plume moves across the

 2  populated areas.

 3                            --o0o--

 4           DR. DRECHSLER:  In October 2003, a group of wild

 5  fires broke out in southern California, which burned

 6  portions of six counties.  The time of peak fire activity

 7  varied by location but encompassed the period between

 8  October 20th and November 2nd.

 9           Listed on this slide are highlights of what these

10  fires destroyed.  The fires impacted six children's health

11  study sites directly and six others indirectly, offering a

12  unique opportunity to conduct a population based large

13  scale investigation of the consequences of wild fire smoke

14  exposure on respiratory health in children.  For

15  comparison, the 2007 fires burned about two-thirds of the

16  acreage and about half the number of homes as the 2003

17  fires.

18           The paper we are presenting this morning is by

19  Kunzli, et al, and is entitled, "Health Effects of the

20  2003 Southern California Wire Fires on Children."  It

21  appeared in the American Journal of Respiratory and

22  Critical Care Medicine in 2006.

23           The objective of the study was to assess the

24  acute effects of wild fire smoke exposure on participants

25  in the children's health study which was started with ARB

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 1  funding.

 2                            --o0o--

 3           DR. DRECHSLER:  The study population included 873

 4  high school seniors and 5,551 first graders.

 5           Smoke exposure was estimated in two ways, first

 6  by self reports of the number of days the child smelled

 7  smoke when indoors during the fire period.  And second, by

 8  the average PM10 concentration over the five days of

 9  highest fire activity.  PM10 concentration proved to be

10  the strongest marker of smoke exposure.

11           Selection of the five-day average PM10 exposure

12  period was based on observations that the highest PM10

13  concentrations periods during the fires typically lasted

14  for about five days.

15           The children filled out questionnaires on

16  respiratory symptoms or illnesses, eye irritation, and

17  asthma attacks experienced, along with medication usage

18  during the fire period.

19                            --o0o--

20           DR. DRECHSLER:  The five-day average PM10

21  concentrations ranged from 104 to 252 micrograms per cubic

22  meter in the effected communities, which was about three

23  to eight times the long-term averages for these regions.

24  Risk of experiencing symptoms was related to length of

25  exposure.  This risk increased 60 to 500 percent with more

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 1  than six smoky days, in contrast to 30 to 250 percent with

 2  one to five smoky days.

 3           Comparisons between communities showed that risk

 4  of experiencing symptoms was increased 30 to 300 percent

 5  in communities with the highest compared to the lowest

 6  PM10 levels across the symptoms studied.

 7           Unexpectedly, the risk of symptoms was higher for

 8  non-asthmatics than for asthmatics, although asthmatics

 9  had a higher base line symptoms rate and smoke related

10  symptoms were added on top of disease related symptoms.

11           In addition, the relationship between smoke

12  exposure and asthma attacks was not statistically

13  significant.  The results also showed that asthmatics were

14  more likely to take preventative action than

15  non-asthmatics.  This is the first study to show that

16  preventative actions reduced the risk of smoke related

17  symptoms.

18                            --o0o--

19           DR. DRECHSLER:  ALB is often asked how to advise

20  the public during wild fire events.  The results of this

21  paper suggest that public health advisories based on PM10

22  using the air quality index would be useful for expressing

23  the level of risk fire smoke poses to the public.

24           Further, preventative actions, including

25  remaining indoors, wearing masks when outdoors, and using

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                                                              8

 1  air conditioning, have been shown to provide some

 2  protection.

 3           In addition, ARB has a major statewide role in

 4  air quality emergencies, including wild fires.  The

 5  emergency response team coordinates with local or unified

 6  incident commands to provide air monitoring,

 7  meteorological and related support service in times of

 8  substantial air emission releases that might impair public

 9  health, such as large wild fires.

10           These efforts are coordinated with Cal/EPA, its

11  boards, departments, offices, and the State Office of

12  Emergency Services, and the US Environmental Protection

13  Agency.  Much of this work is carried out using the rapid

14  response trailer, pictured on this slide.

15           Another useful resource available on the ARB

16  website is a multi agency report entitle, "Wild Fire

17  Smoke, a Guide for Public Health Officials," that was

18  designed to give guidance to local health officers faced

19  with communicating wild fire risks to the public.

20                            --o0o--

21           DR. DRECHSLER:  One concern looking forward is

22  the influence of future climate change and warmer

23  temperatures on wild fire frequencies.  Analyses performed

24  for the Governor's climate change initiative suggest that

25  as temperature rises, there will be an increase in the

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 1  frequency of wild fires as shown on this slide.  This

 2  means that fire smoke contributions to air pollution will

 3  become greater and that related public health concerns

 4  will become more important.  Consequently, advice on

 5  effectively communicating wild fire risk to the public is

 6  likely to become a larger issue than currently.

 7           Thank you for your attention.  Staff will be

 8  happy to respond to any questions you may have.

 9           CHAIRPERSON NICHOLS:  Thank you for the report.

10  I might ask our representatives from the South Coast in

11  particular if you heard of any of these advisories that

12  were discussed in fire situations in your part of the

13  world.  I know we've been communicating with the South

14  Coast District, and they use very similar systems, but

15  they have a lot more outreach and the press generally

16  calls them when there is a forest fire to ask questions

17  about the health effects.  And I think we're completely in

18  sync as far as I know in terms of getting that information

19  out to the public.

20           But I think what's new here is that we actually

21  have now some hard evidence about the effects and the

22  effectiveness of these methods of dealing with personal

23  protection that we can use.  So there is some progress.

24           Are there any questions or comments by Board

25  members?

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 1           BOARD MEMBER RIORDAN:  Just a comment, Madam

 2  Chairman.  Because much of this fire was in very close

 3  proximity to actually where I live, I would be interested

 4  in knowing if in the study they differentiated amongst

 5  those that they tested and if they broke out in the study,

 6  for instance, those who were closest versus those who were

 7  a little further away and then maybe looked at the wind

 8  patterns of those.  There's a lot of wind during that

 9  fire, as you will recall.  That's what was driving the

10  fire.  It was incredible.  Is there --

11           DR. DRECHSLER:  They were not able to resolve the

12  spacial relationship between closeness to the fire.  These

13  are more regional measurements of the air quality.

14           BOARD MEMBER RIORDAN:  But when they interviewed

15  the children or did the interviews, do they have the

16  schools where they were located?

17           DR. DRECHSLER:  Oh, yes.

18           BOARD MEMBER RIORDAN:  I would be interested in

19  asking for a copy of the study.  I would be very

20  interested in reading the details of it.

21           DR. DRECHSLER:  Essentially.

22           BOARD MEMBER RIORDAN:  Thank you.

23           CHAIRPERSON NICHOLS:  All right.  Thank you.

24  We'll just shift personnel here I guess briefly and move

25  on to the next item on the agenda, which is the

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 1  consideration of proposed modifications to the Zero

 2  Emission Vehicle Program.

 3           The way we'll proceed is the staff will give a

 4  presentation and we'll have an opportunity for Board

 5  members briefly to express views and indications about

 6  their response to the report staff before we go to

 7  comments from the public.  This is such a large and

 8  contentious matter that I think it's important that we

 9  give our audience some indications of the Board members'

10  initial thinking at least before we begin to take people's

11  testimony.

12           I would also like to talk a little bit about the

13  timing of this hearing.  This is not the only item on the

14  Board's agenda for today, although we are prepared to go

15  late into the evening.  But looking at the numbers of

16  people that indicated they wanted to testify, I do want to

17  give some kind of general comments.  And I may repeat this

18  again at some later point.  But we are asking all

19  individuals to limit their testimony to three minutes,

20  which is what we usually do.  We're allowing

21  organizations, whether corporations or nonprofit

22  organizations that are testifying as organizations, to

23  have two speakers if the two speakers have different

24  topics that they are going to be addressing and not just

25  sort of a continuation of the same piece of testimony.

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 1           As I mentioned earlier, we have two podiums set

 2  up.  And we're going to ask people to in advance line up

 3  so that we don't lose precious time while we wait for

 4  people to get up to the microphones.

 5           And other than that, we're just going to try to

 6  keep things going as smoothly as we possibly can.  We're

 7  really interested in hearing from everybody, but there's a

 8  limit to what humans beings can absorb.  There's also a

 9  limit to what our court reporter can do.  And in

10  consideration of her needs and the needs of others, we're

11  going to schedule ten-minute breaks about every two to

12  three hours.  She's indicated she's willing to work

13  through lunch, and so we're going to work through lunch

14  too.

15           But what will happen is from time to time a Board

16  member may get up and leave to go to the back area there

17  to grab a bite or take care of other personal needs.

18  However, for those of you who haven't ever been to the

19  back recesses of this floor of the Cal/EPA building, it's

20  completely wired with the auditorium.  So there's no place

21  you can be back there where you're not listening to the

22  testimony that's going on.  So please be assured that

23  we're all going to be listening attentively throughout the

24  entire hearing.

25           I think we have the staff here for this item.

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 1  Let me say a few words before the staff presentation.

 2           I think it's important to note that this program

 3  since its adoption in 1990 has been through a number of

 4  iterations and has been modified several times to make

 5  adjustments.  I wasn't around when the program was

 6  adopted.  I don't think any current member of the Board

 7  was here at the very early stages of it.  But several of

 8  us did live through at least the last version of changes.

 9  And it's been a difficult process as the program in some

10  respects seemed to have lost its way.

11           I think I can speak for every member of the Board

12  here today in saying that our goal here today is to emerge

13  with a clear direction that will get this program on

14  track.  And that's our goal is to have California vehicle

15  program be the test bed and California be the state where

16  manufacturers first bring their best cleanest technology.

17           In order to do that, we obviously have to weigh a

18  lot of considerations about what it takes to actually

19  bring new technologies to market.  We have a track record

20  of considerable succeed in California.  We've also had a

21  few hiccups along the way in terms of our abilities to

22  predict when and where technologies would be available or

23  to bet on which ones would win.

24           One of the things that I'm really intent on

25  having happen here today is to have as much clarity in the

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 1  discussion as we can.  I know there's a lot of passion on

 2  all sides of this.  But one of the things that I have

 3  found probably most disturbing in the meetings I've had

 4  leading up to this meeting has been the way in which

 5  sometimes people feel it necessary to disparage

 6  alternative technologies if it's not their own favorite.

 7  And so I just want to sort of put down a marker here which

 8  may have to come later that as far as the Board is

 9  concerned, our goal is to advance all technologies that we

10  think have a promise of being effective in both cleaning

11  up the air and reducing our contribution to greenhouse gas

12  emissions and to make sure that we're not tilting the

13  scales in one direction or another simply in order to

14  favor some particular technology that happens to be our

15  favorite.

16           And with that, I'm just going to let the staff

17  proceed to their report and then we'll have some more

18  discussion.  Mr. Goldstene.

19           EXECUTIVE OFFICER GOLDSTENE:  Thank you, Chairman

20  Nichols.

21           While our expert panel reported findings in May

22  that fuel cell and battery technology had not progressed

23  sufficiently to warrant implementation of the regulation

24  without changes, technology is advancing rapidly.  As

25  such, the proposed amendments before you strike a balance

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 1  between feasible implementation requirements and

 2  aggressive acceleration of advanced and zero emission

 3  technologies.

 4           The proposal before you today reflects the result

 5  of extensive deliberations with auto makers and interested

 6  stakeholders.  Staff believes that the proposed

 7  modifications will advance pure ZEV technology research

 8  and development, support the commercialization of the

 9  ZEV-enabling advanced technology vehicles, and achieve

10  significant criteria pollutant emission reductions.

11           Analisa Bevan of the Mobile Source Control

12  Division will now begin the staff presentation.  Analisa.

13           (Thereupon an overhead presentation was

14           presented as follows.)

15           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

16  CHIEF BEVAN:  Thank you, James.  Good morning, Chairman

17  Nichols and members of the Board.

18           Staff brings to you today proposed amendments to

19  the zero emission vehicle regulation.  We bring these

20  amendments to the Board at your direction from the May

21  2007 hearing, at which the Board heard a report from our

22  independent expert panel on the status of technologies

23  used to comply with that regulation.

24           Your directions at that time were to adjust the

25  regulation to better match the state of vehicle

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 1  technologies, address treatment of emerging ZEV

 2  technologies, and wherever possible, simplify the program.

 3  We believe the amendments before you today address these

 4  directives.

 5                            --o0o--

 6           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

 7  CHIEF BEVAN:  My presentation this morning will review the

 8  structure and status of the current regulation, provide

 9  you with an overview of the path we've taken to develop

10  these proposed amendments, describe briefly the main areas

11  of change that are proposed, prepare you for some of the

12  issues you will likely hear about from those testifying,

13  and finally summarize the proposal with staff's

14  recommendations.

15                            --o0o--

16           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

17  CHIEF BEVAN:  Given its lengthy history and complex

18  structure, it is important to reflect on why we have the

19  ZEV mandate.

20           First, the ZEV mandate is needed to achieve

21  significant air quality benefits in order to reach our

22  health-based air quality standards.

23           Second, the program pushes research, development,

24  and deployment of zero emission vehicles.  A performance

25  standard alone does not accelerate the development of

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 1  transformative technology.

 2           And third, the program encourages ZEV

 3  commercialization through introduction of ZEV enabling

 4  technology.  While maintaining the goal of zero, the

 5  program rewards and commercializes evolutionary

 6  technologies that move us to the ZEV end game.

 7           The ZEV program is an incubator that hatches

 8  technologies and then introduces them to the market for

 9  commercial acceptance.  Each of these goals has been kept

10  in mind as the program has evolved since 1990 and is

11  present today in the staff's proposed amendments.

12                            --o0o--

13           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

14  CHIEF BEVAN:  The ZEV mandate has long been described as a

15  requirement for ten percent ZEVs.  This was the goal when

16  first adopted in 1990.  Since that time, the percentage

17  requirement has increased and it has had four major

18  revisions that have responded to technology readiness

19  challenges as well as opportunities.  These amendments

20  have incorporated new vehicle categories that have both

21  maximized emissions performance from combustion engines

22  and commercialized ZEV-enabling technologies.

23           The structure of the current regulation is as

24  follows.

25           In 2012, the requirement is for auto makers to

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 1  generate credits equal to 12 percent of their annual

 2  sales.  They may generate those credits from a variety of

 3  vehicle types earning different levels of credit.  The

 4  actual percentage of annual sales works out to be about 42

 5  percent.

 6           About one percent of the vehicles have to be ZEVs

 7  like battery electric vehicles and hydrogen fuel cell

 8  vehicles.  We refer to this category as the gold category.

 9  Auto makers may meet part of their obligation with partial

10  zero emission vehicles, or PZEVs.

11           These super ultra low emission vehicles certify

12  to zero evaporative emission standards and must maintain

13  their emissions performance with a $150,000, 15-year

14  warranty.  We refer to this category as the bronze

15  category.  The PZEV option accounts for about 30 percent

16  of annual sales.

17           Auto makers may also used advanced technology

18  PZEVs to comply with their requirements.  These vehicles

19  meet the emissions requirements of a PZEV and make use of

20  technology that enables ZEV commercialization, such as

21  batteries, regenerative breaking, and electric motors as

22  used in hybrid electric vehicles.  This category is

23  referred to as the silver category.  Advanced technology

24  PZEVs can account for nearly 11 percent of sales.

25                            --o0o--

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 1           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

 2  CHIEF BEVAN:  The 2003 amendments to the program provided

 3  auto makers with an alternative path for compliance.

 4  Under this path, if auto makers produced new vehicles

 5  instead of using banked credits from early compliance,

 6  they could fulfill their requirements with their market

 7  share of a target number of fuel cell vehicles.  In

 8  exchange for this lower requirement for fresh ZEV

 9  production, auto makers had to backfill the remainder of

10  their gold requirement with AT PZEVs.

11           This chart shows the targets set for each phase

12  of implementation between 2005 and 2017.  The alternative

13  path establishes a ramp up schedule that increases the

14  target number of fuel cell vehicles by a factor of ten for

15  the first three phases and then doubles the requirement

16  before returning the program to the original structure.

17           Creation of this implementation schedule in 2003

18  was one of the factors that prompted the Board to ask

19  staff to conduct a technology review prior to 2009 in

20  order to ensure that the pace of the ramp was appropriate.

21                            --o0o--

22           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

23  CHIEF BEVAN:  The ZEV program has been a success.  Since

24  1990, a number of achievements have taken place that staff

25  believes would not have happened had the goal of zero

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 1  emissions not been established.

 2           First, in 1998 with the introduction of PZEVs,

 3  auto makers showed that near zero emissions could be

 4  achieved with combustion engines.  To be a part of the ZEV

 5  program, these PZEVs not only showed near zero emissions

 6  at the tail pipe, but also demonstrated two other factors

 7  that set ZEVs apart:  Evaporative emissions and lifetime

 8  durability.

 9           Second, California saw introduction of hybrid

10  electric vehicles.  In 2001, by recognizing the role that

11  enabling technologies could play in advancing zero

12  emission vehicle development, California became leader in

13  the placement of hybrid like vehicles.

14           Third, the program has progressed the development

15  of battery electric and fuel cell vehicles.

16  Demonstration, preparation of the marketplace,

17  infrastructure deployment have all taken place in

18  California as a result of the ZEV mandate and have made

19  the state ready for ZEV commercialization.

20                            --o0o--

21           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

22  CHIEF BEVAN:  Presented in this slide are the numbers of

23  vehicles we've seen placed in California as a result of

24  the ZEV program.  We've seen more than half a million

25  bronze vehicles, over a hundred thousand hybrids, and

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 1  compressed natural gas silver vehicles, and the largest

 2  demonstrations of battery electric and fuel cell vehicles

 3  in the world.

 4                            --o0o--

 5           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

 6  CHIEF BEVAN:  As I described a few slides back when the

 7  Board adopted the amendments to the regulation in 2003,

 8  they directed staff to conduct a technology review.  This

 9  review took place in late 2006 and early 2007.  The

10  findings of the independent expert review panel and the

11  assessment of the program's implementation were presented

12  in May 2007.

13           Taking the Board's direction to propose

14  amendments to the regulation, staff held a public workshop

15  in July of 2007 at which a range of options were presented

16  for comments.  A concept paper was released in November

17  2007 with a more refined staff approach.  Staff received

18  feedback on the concept paper through individual meetings

19  and written comments.  Finally, the Initial Statement of

20  Reasons was released on February 8th, in preparation for

21  this hearing.

22                            --o0o--

23           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

24  CHIEF BEVAN:  I'll now turn to staff's proposed amendments

25  to the ZEV regulation.  As I started my presentation, I'll

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 1  review why we are proposing changes, primarily to respond

 2  to the Board's direction in May 2007 to align the

 3  requirements to more closely reflect the state of

 4  technology as presented by the expert panel, create

 5  opportunities for emerging technologies, specifically

 6  plug-in hybrid electric vehicles and battery electric

 7  vehicles, and to simplify the program wherever possible.

 8                            --o0o--

 9           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

10  CHIEF BEVAN:  The most difficult to contemplate of the

11  directives was the need to address the pace of technology

12  development.  The expert panel found that fuel cell

13  vehicles were farther from commercial readiness than

14  expected due primarily to durability and cost hurdles.

15           Battery electric vehicles also continue to face

16  cost concerns.  From the expert panel's finding, it was

17  clear that more development was needed before gold

18  technologies could be ready for commercialization.

19  However, the current regulation requires a premature

20  ramp-up to large scale fuel cell production.

21           Additionally, the way the current regulation is

22  structured, little to no flexibility, is allowed to pursue

23  ZEV technologies besides fuel cells, specifically if an

24  auto maker choose to pursue development have batter

25  electric vehicles, they would have to do so in addition to

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 1  fuel cell vehicles and at a significantly greater volume

 2  than fuel cells.

 3           This cap and substitution ratio did not encourage

 4  multiple ZEV technologies.  When we established the

 5  implementation schedule for ZEVs in 2003, we knew that the

 6  pace of future development would be difficult to predict.

 7  And the Board acknowledged that difficulty by directing

 8  staff to assess technology progress and return if

 9  necessary for mid course corrections.

10                            --o0o--

11           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

12  CHIEF BEVAN:  I'll turn now to a summary of significant

13  proposed amendments.  I'm highlighting the amendments with

14  the greatest impact and/or greatest controversy.  The

15  initial statement of reasons detail all of the proposed

16  changes to the regulation.

17           Additionally, since posting on the ISOR for the

18  45-day comment period, a number of minor suggestions have

19  been made that provide further clarity, correct minor

20  errors, and are appropriate to the overall goals of the

21  program.  These have been listed and are posted at the

22  back of the room.  They will be made available for a

23  15-day comment period as staff suggested changes to the

24  proposed amendments.

25                            --o0o--

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 1           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

 2  CHIEF BEVAN:  As a broad overview, our significant

 3  proposed amendments include:

 4           Creation of a new path for compliance that will

 5  replace the two-path system currently in place and set new

 6  floor requirements for ZEV production as well as provide a

 7  backfill category at ATPZEVs that use a zero emission

 8  vehicle fuel, electricity, or hydrogen;

 9           A revision to the credit system that addresses

10  concerns about banked credits;

11           And establishment of new categories of ZEVs and

12  ATPZEVs to encourage emerging ZEV technologies.  I'll

13  describe these in greater detail in the slides to come.

14                            --o0o--

15           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

16  CHIEF BEVAN:  Additional changes proposed include

17  amendments to the way silver credits are calculated to

18  address all manner of plug-in hybrids;

19           An increase in the credit earned by neighborhood

20  electric vehicles, extension of the travel provision which

21  affects the number of cars sold in other states with the

22  ZEV regulation to align this provision with the

23  developmental stages of technology still being

24  experienced;

25           Creation of a ramp-up period for intermediate

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 1  volume manufacturers that are transitioning to large

 2  volume manufacturers;

 3           And a requirement that data pertaining to ZEV

 4  compliance that is submitted to the Air Resources Board,

 5  specifically the earning and expending of ZEV credits, is

 6  public from a specified date forward.

 7           I'll now go into more detail on each of these

 8  topics.

 9                            --o0o--

10           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

11  CHIEF BEVAN:  The focus of much of our proposal has been

12  establishing a feasible and appropriate requirement for

13  the 2012 through 14 time frame.  The changes proposed for

14  the 2009 through 2011 primarily add flexibility rather

15  than changing vehicle volumes.  And fundamental to the

16  2012 and subsequent model year changes is the creation of

17  a new path.

18           Before the 2003 amendments, auto makers had a

19  single path for compliance.  Prior to the program's full

20  implementation, auto makers demonstrated battery electric

21  cars and delivered large numbers of neighborhood electric

22  vehicles.  When the program was changed in 2003, we

23  established the two path system:  The base path and

24  alternative path.  Auto makers had a choice then:  To

25  deliver a relatively small number of fuel cell vehicles in

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 1  demonstration quantities, or provide many more, on the

 2  order of ten times, more new vehicles and/or banked

 3  credits.

 4           The bifurcation of the program has resulted in a

 5  mix of compliance strategies, uncertainty about how many

 6  vehicles the program generates, and the uneasiness about

 7  the role of banked credits in the program.  And on top of

 8  all of that, it has greatly complicated the program.

 9           This is why staff has proposed returning the

10  program to a single compliance path referred to as the new

11  path.  Within this path, battery, electric, and fuel cell

12  vehicles will make up the core of the requirement.

13  Plug-in hybrids or hydrogen internal combustion engine

14  vehicles will be allowed to backfill a portion of the

15  obligation.  And silver and bronze portions of the

16  regulation will remain unchanged.

17                            --o0o--

18           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

19  CHIEF BEVAN:  The new path has its roots in the

20  alternative path requirements.

21           The requirement for gold vehicles is established

22  by the targets set in the alternative path for the 2012 to

23  2014 and 2015 to 2017 phases at 25,000 and 50,000 vehicles

24  respectively.  Within that requirement, for the 2012 to

25  2014, period we are proposing an optional approach that

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 1  establishes a minimum floor requirement for ZEVs set at

 2  2,500 fuel cell vehicles or a proportional number of other

 3  ZEV types based on the credit ratio.

 4           The balance of the 25,000 vehicle requirement

 5  could then be made up with a proportional number of

 6  enhanced ATPZEVs.  This is a new category of vehicles

 7  referred to as silver plus that I'll describe in the next

 8  slide.  The result of this floor requirement plus the

 9  silver plus backfill option is that while fewer pure ZEVs

10  may be produced, the combination of fuel cell vehicles

11  and/or battery electric and plug-in hybrid vehicles will

12  be much greater than the 25,000 vehicle requirement.  This

13  will be illustrated further in subsequent slides.

14           CHAIRPERSON NICHOLS:  Could I interrupt for one

15  second here?  Because I think I just want to make sure

16  that I understand and others do too that this minimum

17  number that you're talking about is not a maximum.  That

18  is, a manufacturer could sell all pure ZEVs.  This is the

19  floor you're talking about here.

20           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

21  CHIEF BEVAN:  Correct.

22           CHAIRPERSON NICHOLS:  The hope would be

23  presumably they would choose to do better.  That's what

24  you're proposing to mandate.

25           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

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 1  CHIEF BEVAN:  Yes.  And a similar approach is proposed for

 2  the 2015 to 2017 time frame, except that the 50,000

 3  vehicle requirement, one half or 25,000 vehicles must be

 4  ZEVs and than the portion to use silver plus vehicles is

 5  allowed for the other half.

 6                            --o0o--

 7           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

 8  CHIEF BEVAN:  The creation of the silver plus category is

 9  important.  It singles out characteristics that move ZEV

10  enabling technologies further towards practical

11  application of pure ZEVs.  Silver plus vehicles are

12  defined as earning silver credit greater than one and they

13  must use a fuel that can be used in a ZEV, electricity or

14  hydrogen.  Examples of such vehicles are plug-in hybrids

15  and hydrogen internal combustion engine vehicles.  Both of

16  these technologies push us closer to commercialization of

17  pure ZEVs through componentry used on board the vehicle,

18  establishment of infrastructure, and through raising of

19  market awareness of electric drive through plugging in or

20  hydrogen as the transportation fuel.

21           Setting these vehicles apart in a new silver plus

22  category also gives us the opportunity to treat them

23  exclusively as part of the gold requirement in the new

24  path.

25           It is important to note those are not vehicle

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 1  technologies that are available today in the marketplace.

 2  While staff is confident they may be ready for

 3  commercialization very soon, not all auto makers are

 4  prepared to market a plug-in hybrid or hydrogen ICE car in

 5  the near term, which means that either this is an

 6  aggressive new category for auto makers to take on or the

 7  gold requirement is really their market share of 250,000

 8  vehicles, not 2,500, which is to say for some auto makers

 9  this silver plus option may not be available.  Therefore

10  this is essentially no change to the gold requirements

11  relative to the current regulation.

12                            --o0o--

13           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

14  CHIEF BEVAN:  As promised, here we illustrate the total

15  number of vehicles that results in each phase if maximum

16  use of the silver plus category is used.  Where the gold

17  requirement is 25,000 in 2012 to 2014, the floor of 2,500

18  fuel cell vehicles with backfill of 75,000 plug-in hybrids

19  with an assumed 22 miles of all-electric rang results in

20  77,500 vehicles instead.

21           This is a combination of pure zero emission

22  technology that requires significant further development

23  prior to commercialization coupled with nearer term

24  available technology that results in significant zero

25  emission miles in aggressive market introduction volumes

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 1  for a total of more than three times as many total program

 2  vehicles.

 3           Similarly, in the 2015 to 2017 time frame, the

 4  total number of program vehicles doubles compared to the

 5  target.  In this case, the number of ZEVs is required to

 6  ramp up by a factor of ten compared to the previous phase.

 7                            --o0o--

 8           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

 9  CHIEF BEVAN:  Staff is proposing two new ZEV types to

10  capture two emerging categories of vehicle.

11           The first advertise creation of the type 1.5 ZEV.

12  This type of ZEV is expected to be a city type battery

13  electric vehicle.  The requirement for the type 1.5 ZEVs

14  is a range between 75 and 100 miles.  It has been

15  suggested this range is an attractive niche in the

16  potential BEV market and should be provided recognition

17  and credits greater than our previous definition of city

18  BEVs with ranges as low as 50 miles.  It is proposed that

19  the type 1.5 BEV earn 2.5 credits.

20           The Type 4 ZEVs are proposed as a way to advance

21  progress in fuel cell technology.  The Type 4 ZEV must

22  have a range of at least 200 miles and be faster refueling

23  capable.  It is proposed that this ZEV type earn five

24  credits per vehicle.

25                            --o0o--

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 1           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

 2  CHIEF BEVAN:  To put these two new ZEV types into

 3  perspective, this ruler of credits is presented to show

 4  how much credit different vehicle types within a program

 5  earn.

 6           The PZEV is at the bottom of the spectrum,

 7  earning .2 credits.

 8           ATPZEVs earn between .5 and 2.7 credit.  The

 9  example shown here is a blended type hybrid with 22 miles

10  all-electric range earning 1.5 credits.

11           It is proposed that NEVs earn .3 credits each.

12           Battery electric vehicles can earn between two to

13  four credits based on their range.

14           And fuel cell vehicles earn between four and five

15  credits based on their range.

16           As I alluded to, the target and floor number of

17  vehicles required are based on the use of Type 4 ZEVs or

18  fuel cells with range greater than 200 miles.  Staff is

19  proposing allowing other types of ZEVs to meet the

20  requirement at a ratio proportional to the credit earned

21  per vehicle.  For example, if all auto makers were to

22  choose to make Type 2 BEVs instead of Type 4 fuel cells,

23  the number of vehicles needed would be 2,500 times

24  five-thirds or 4,167 cars.  NEVs are not allowed to be

25  used to meet the floor requirements in the new path.

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 1                            --o0o--

 2           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

 3  CHIEF BEVAN:  In the current regulation, there is a cap on

 4  the use of battery electric vehicles of 50 percent.  Staff

 5  is proposing to remove these caps.

 6                            --o0o--

 7           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

 8  CHIEF BEVAN:  Neighborhood electric vehicles are the only

 9  commercially available ZEV today.  Staff estimates that

10  15,000 are in operation in California currently.  Although

11  their initial volumes were high, most likely because of

12  the lucrative ZEV credit offered prior to 2003 amendments,

13  their sales have leveled off and are at a modest level.

14           The staff have reviewed the environmental

15  contribution of NEVs to reducing emissions from the motor

16  vehicle fleet and have concluded that they deserve more

17  credit than they currently earn.

18           Staff propose amending the credit from .15 to .3

19  per vehicle to reflect the emission reductions achieved

20  from reducing cold starts and the zero emission miles

21  accumulated for short trips.  Staff believe that adjusting

22  the credit to .3 is the appropriate balance between

23  rewarding environmental benefit and recognition of the

24  limited functionality and range.

25                            --o0o--

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 1           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

 2  CHIEF BEVAN:  The issue of banked credit use has been

 3  forefront in the complexity of making amendments to the

 4  ZEV regulation since the 2003 hearing.  The availability

 5  of banked credits for compliance has created substantial

 6  uncertainty around the true pace of progress on ZEV

 7  technologies.

 8           Concern about blackout in product and an

 9  inability to accurately predict how many vehicles will

10  result from the program requirements have lead staff to

11  re-think how banked credits are handled.  Staff proposes

12  to extend carry back provisions.  Meaning the amount of

13  time an auto maker has to demonstrate compliance and to

14  create a carry forward provision which limits how gold

15  banked credits may be used after being banked for three

16  years.

17           The example shown in the slide illustrates the

18  extremes of these provisions.  In the carry forward

19  provision, gold credits earned may only offset gold

20  obligations for three years.  After the three years, these

21  gold credits may be used to offset silver plus, silver,

22  and bronze categories only.

23           In the carry back provision, if the gold vehicle

24  obligation is not met in one year or the next year, the

25  auto maker may make up the obligation in the third year

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 1  after the missed year.  These provisions in combination

 2  provide auto makers a window of flexibility to align their

 3  product cycles and demonstration programs that may span

 4  multiple model years.  It is consistent with the

 5  flexibility allowed in the alternative path which set

 6  vehicle requirements in three-year windows.

 7           It is important to note that staff believe that

 8  banked credits will largely be depleted by the 2012 model

 9  year and that in that time frame the program will operate

10  in a much more real time mode.

11                            --o0o--

12           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

13  CHIEF BEVAN:  Also related to the issue of banked credits

14  is the transparency of the information contained in the

15  bank of ZEV.  Staff proposed to require production data be

16  made public starting in the 2009 model year and to release

17  the ZEV credit bank balances in model year 2010.  However,

18  the language in the regulations does not define whether

19  credit trades are public.  These amendments will open up

20  clearer understanding of the magnitude and role of banked

21  credits in compliance of the program.

22                            --o0o--

23           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

24  CHIEF BEVAN:  The ZEV regulation has been adopted by 12

25  other states and the number is likely to grow.  The effect

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 1  of this on auto makers is the nation wide increase in the

 2  volume of vehicles needed for compliance by a factor of

 3  almost three.  To recognize that for the earliest stages

 4  of development and demonstration, requiring more vehicles

 5  isn't always helpful.  In 2003, the ZEV regulation

 6  incorporated a provision which allows fuel cell vehicles

 7  placed in California to count towards compliance in other

 8  states and vice versa.  This provision is called the

 9  travel provision.

10           Because the volumes of fuel cell vehicles

11  required will continue to be below pre-commercial volumes,

12  staff proposes to extend the travel provision to 2017.

13  Additionally, with the anticipation of the battery

14  electric vehicles may come back to the market, staff are

15  proposing to offer the travel provision until 2014 to

16  battery electric vehicles to encourage their

17  re-introduction.

18                            --o0o--

19           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

20  CHIEF BEVAN:  At the May 2007 hearing, staff presented to

21  the Board a suggestion that the definition of intermediate

22  volume manufacturers be modified to reflect the overall

23  growth in the vehicle market.  The Board expressed their

24  clear direction to not change the definition.  However,

25  staff were directed to look at ways to soften the

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 1  transition to the large manufacturers status.

 2           In consultation with the affected IVMs, staff

 3  developed the proposal shown on this table.  The current

 4  regulation allows a six-year lead time after an

 5  intermediate volume manufacturer has hit the sales volume

 6  of a large auto maker.

 7           Staff propose a ramp-up period of six years after

 8  the lead time during which they would be subject first to

 9  a 25 percent requirement for ATPZEVs and then a 33 percent

10  requirement for ATPZEVs.  This would allow them to enter

11  into the advanced technology vehicle market before being

12  asked to comply with the full portfolio of ZEVs and

13  ATPZEVs.

14                            --o0o--

15           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

16  CHIEF BEVAN:  This completes our description of the major

17  amendments proposed.  I'll wrap up now with a summary of

18  the effects of the proposed changes and a discussion of

19  some of the main issues you'll be hearing about and our

20  recommendations.

21                            --o0o--

22           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

23  CHIEF BEVAN:  This table presents the anticipated number

24  of vehicles produced to meet the ZEV requirements.  In the

25  2009 through 2011 phase, we accounted for an aggressive

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 1  use of credits for compliance, which is reflected mostly

 2  in the number of expected fuel cell vehicles.  Because we

 3  are unaware of large auto maker plans to introduce any

 4  battery electric vehicles in this time frame, we assume

 5  none.

 6           The silver plus volume expected is based on

 7  announcements by auto makers regarding new product

 8  launches and associated volumes.  In the 2012 to 2014 time

 9  frame, we assume that the ZEV bank has been spent down and

10  that the volumes of vehicles we'll see reflect the

11  requirements.  The same is true for the 2015 to 2017 time

12  frame.

13                            --o0o--

14           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

15  CHIEF BEVAN:  Breaking this down further to look at just

16  the gold and silver plus categories over the 2012 to 2017

17  period, staff expects to see either the same number of

18  vehicles as in the current proposal, i.e., 75,000 if auto

19  makers make maximum use of gold vehicles for compliance or

20  nearly two-and-a-half times that many vehicles if they

21  maximize the opportunities to comply with silver plus

22  vehicles as well as gold vehicles, i.e., about 186,000

23  vehicles.

24                            --o0o--

25           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

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 1  CHIEF BEVAN:  Turning now to the air quality impact of the

 2  proposed amendments, we see there is an improvement in air

 3  quality resulting in the changes compared to the current

 4  regulation.  The emissions impacts presented in this table

 5  are well to wheel lifetime emissions using the Greek

 6  model.  Overall, there is a 7,000 ton reduction in ROG and

 7  oxides of nitrogen and 5.5 million on the reduction in

 8  carbon dioxide emissions.

 9                            --o0o--

10           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

11  CHIEF BEVAN:  My presentation will now focus on the major

12  issues we expect to be the subject of testimony and

13  discussion here today.

14                            --o0o--

15           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

16  CHIEF BEVAN:  The staff proposal establishes a gold

17  requirement of 25,000 ZEVs in the 2012 and to 14 time

18  frame, of which at least 2500 must be ZEVs and for which

19  the remaining obligation may be met with silver plus

20  vehicles.  There has been much discussion and comment

21  surrounding whether 2,500 is the right floor requirement.

22           Proponents of higher numbers have mentioned

23  between 5,000 and no change or 25,000 vehicles.  Arguments

24  in favor of changing the floor requirement upward include

25  the need to accelerate ZEV volumes in order to set us on

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 1  the right pace for meeting smog emissions and climate

 2  change goals and the need to accelerate deployment for

 3  fueling infrastructure.

 4           Arguments against raising the floor requirement

 5  have centered around the readiness of the technology for

 6  demonstration in larger volumes and the costs associated

 7  with such numbers.  It is argued that the costs spent to

 8  demonstrate larger volumes does not advance or accelerate

 9  the commercialization of ZEVs.  The difference in cost of

10  compliance of requiring 25,000 gold versus the staff

11  proposal of 2,500 gold vehicles is in the billions.

12                            --o0o--

13           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

14  CHIEF BEVAN:  In the current regulation, fuel cell

15  vehicles earn 40 credits each and battery electric

16  vehicles earn ten.  The current regulation ramped down the

17  credits for both fuel cell vehicles and battery electric

18  vehicles to three starting in 2012.  Staff is proposing to

19  maintain a distinction between fuel cell and battery

20  electric credits with four to five credits for fuel cells

21  and two to three credits for battery EVs depending on

22  range performance.

23           At issue has been whether fuel cell vehicles

24  should have an even greater credit ratio compared to

25  battery EVs.  Proponents argue that a higher credit ratio

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 1  helps assure continued investment in fuel cell vehicles.

 2  It is also argued that since fuel cell vehicles are

 3  further from commercialization they need more regulatory

 4  incentive than battery EVs to remain a viable compliance

 5  path.

 6           On the other hand, opponents of raising the

 7  credit for fuel cell vehicles argue that companies working

 8  on fuel cells are committed to them and are unlikely to

 9  abandon a product they describe as their ultimate goal.

10  Additionally, an argument can't be made on an

11  environmental basis to substantiate higher credits for

12  fuel cell vehicles.

13                            --o0o--

14           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

15  CHIEF BEVAN:  The issue of disclosing ZEV credit data has

16  been before the Board several times in the last few

17  months.  The groundwork has been laid for making

18  production data and bank balances public in the 2009 and

19  2010 model years respectively.  However, the issue of

20  whether trades between companies should be made public

21  remains a point of debate.

22           Proponents argue that making trades public

23  provides all interested parties with the facts they need

24  to adequately analyze the status of the program.

25           Opponents argue the release of trade information

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 1  compromises the trade market and will effectively end the

 2  practice as companies would be concerned that the

 3  existence of trades may forecast their product plans and

 4  expose them to liability associated with a third party

 5  manufacturer.  They also argue that disclosure of trades

 6  could impact the credit's monetary value.

 7                            --o0o--

 8           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

 9  CHIEF BEVAN:  The staff proposal provides a ramp up period

10  for intermediate volume manufacturers who are

11  transitioning to the large volume status with a

12  requirement to produce silver vehicles.  It has been

13  suggested this ramp up period is too generous and should

14  be shortened.

15           The proponents of this suggestion argue that all

16  but one transitioning intermediate volume manufacturer is

17  already demonstrating ZEVs.  Additionally, they argue that

18  the six-year lead time provided in the current regulation

19  is sufficient time to develop product in response to the

20  large volume manufacturer obligations.  The opponents of

21  such a change argue that the additional ramp up time is

22  necessary to continue work on promising silver plus

23  technologies that may prove ultimately to be as valuable

24  as ZEVs.

25                            --o0o--

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 1           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

 2  CHIEF BEVAN:  As I mentioned before, the issue of the

 3  impact of the adoption of the ZEV regulation in other

 4  states been huge for the auto makers.  Our proposal allows

 5  ZEVs placed in California to count towards compliance in

 6  other states and vice versa.  It has been suggested that

 7  while silver plus vehicles are also pre-commercial that

 8  they also be allowed to travel, the credits to travel.

 9           The proponents argue this softens the ramp up of

10  this new technology.  Opponents argue that it will reduce

11  the number of silver plus vehicles that are introduced to

12  California and that this technology is ready for

13  commercialization.  Additionally, one of the reasons for

14  creating the travel provision was to provide adequate time

15  for other states to develop infrastructure.  For silver

16  plus vehicles, this isn't an issue.

17                            --o0o--

18           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

19  CHIEF BEVAN:  This program has been a success.  Look at

20  the half a million bronze vehicles and over 100 million

21  silver vehicles commercialized to date.  California has

22  forged the way in the demonstration and commercialization

23  of the world's cleanest cars and is the home of the most

24  ambitious demonstrations of advanced near and near zero

25  emission vehicle technologies.  We are making progress.

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 1           The program has become complex because the Board

 2  has thoughtfully and methodically tweaked the program to

 3  keep the effort moving forward towards the never wavering

 4  goal of commercializing zero emission vehicles while

 5  acknowledging the pace of technology development and

 6  taking advantage of the incremental technologies that

 7  could be brought to market sooner.

 8           Staff recommends that the Board adopts the

 9  proposed amendments.  They increase air quality benefits,

10  encourage emerging technology, and maintain the state's

11  progress towards transformation of the vehicle fleet to

12  zero emissions.

13           Lest our audience think we believe our regulation

14  alone will make the transition to zero emission vehicles

15  happen, I'd like to quickly review the other activities we

16  are engaged in that demonstrate our commitment to

17  achieving success for these technologies.  Last year's

18  budget included $25 million for support of alternative

19  fuels.  The alternative fuel incentive program has awarded

20  $6 million in grants for the better understanding and

21  development of plug in hybrids and electric vehicles; 1.62

22  million for alternative fuel vehicle incentives supporting

23  CNG vehicles, neighborhood electric vehicles, and battery

24  electrics vehicles purchased by consumers in the next

25  year; and 175,000 to support battery electric vehicle

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 1  infrastructure development and to support installation of

 2  level two and three public BEV charging stations.

 3           With the establishment of AB 118 fund to develop

 4  and deploy technology and alternative and renewable fuels

 5  and to fund air quality improvement projects, we're

 6  hopeful that additional incentives for purchasers of ZEV

 7  program vehicles will be made available.  The

 8  collaborative work done as a partner in the California

 9  Fuel Cell Partnership has made substantial progress toward

10  preparing California for fuel cell vehicle

11  commercialization.  And the state's commitment to ensure

12  that hydrogen stations are available for fuel cell vehicle

13  deployment has been exemplified by the efforts of the

14  California Hydrogen Highway Network.

15           Finally, I'll make a plug for our consumer

16  oriented website, driveclean.ca.gov, which provides

17  information to prospective new car buyers about new

18  environmental vehicle technologies and helps them choose

19  the cleanest cars available as well as providing consumers

20  with information about incentives at the federal, state,

21  and local level.

22           This concludes staff's presentation.

23           CHAIRPERSON NICHOLS:  Thank you very much,

24  Ms. Bevan.  It was a very thoughtful and thoughtful

25  presentation, and I think we should acknowledge at the

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 1  outset the time and care that the staff put into this

 2  proposal.  Obviously, you've weighed a lot of

 3  consideration and I think you've listened to a lot of

 4  different inputs.  And the proposal reflects that attempt

 5  to balance all of the input that you've received as well

 6  as the expertise that the Board staff brings to this

 7  matter through a technical background.  And we appreciate

 8  that very much.

 9           Needless to say, however, as a Board of

10  appointees, and a Board of appointees of a Governor who

11  himself is a zero emission vehicle enthusiast, we all have

12  our own ideas about how we might possibly wish to improve

13  upon the staff proposal.  And I think some of those ideas

14  are probably going to emerge during the course of the

15  hearing.

16           But I thought it might be useful, because I have

17  had opportunities to talk in the last few days with less

18  than a quorum but a couple of my fellow Board members.

19  And in particular, I want to call upon our Board's

20  resident automotive engineer, since that is a position

21  that the Board enjoys.  We have a current incumbent,

22  Professor Dan Sperling runs the Institute for

23  Transportation studies at U.C. Davis and we've relied a

24  lot on his views in the past as well.  So wanted to ask

25  Dan if he'd like to offer any thoughts at this point about

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 1  where we are with the program.

 2           BOARD MEMBER SPERLING:  Well, thank you.

 3  Obviously, I do have many thoughts.

 4           Let me start off by saying I think Analisa Bevan

 5  deserves an honorary Ph.D. for her efforts.  There were

 6  plenty of equations in the report and a tremendous amount

 7  of thought and creativity that went into that.  And I

 8  think a lot of credit goes to her and the staff and her

 9  mentor, her faculty advisor Tom Cackette perhaps.

10           Having said that, you know, as Chairman Nichols

11  said, this ZEV program has led a very tortured life.  Many

12  people characterize it as a failure.  Many characterize it

13  as a huge success.  I tend to fall on the side of thinking

14  it's been very much a success in terms of motivating

15  investments and interest in electric drive technology.

16  You know, in 1990 when this started, almost no one was

17  thinking about the future of vehicles being electric

18  drive, based on electric drive technology.  And now almost

19  everyone in the industry would agree that that is the

20  future.  There's uncertainty about exactly what that means

21  in terms of electric drive, but there's agreement on that.

22  And the ZEV mandate deserves a lot of credit for that

23  paradigm change for that paradigm shift in how we think

24  about the vehicles.

25           Having said that, there's one other major thought

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 1  I want to offer.  And that is that having gone through

 2  this tortured life and being one of the most complex

 3  policy instruments I've ever seen -- and it's evolved that

 4  way for many different reasons -- but it is incredibly

 5  complex.  And a lot of circumstances have changed.  And

 6  some parts of the ZEV program have been very successful,

 7  not just in terms of electric drive, but in terms of

 8  creating much cleaner gasoline vehicles.

 9           So I'm going to make a resolution at some point

10  here, whenever it seems appropriate.  I defer to Chairman

11  Nichols and the others when that would be.  But the

12  resolution would be that we overhaul this program

13  completely.  Start from scratch.

14           Right now I think we have a job to fix what's

15  here.  And the proposal fix a lot of the pieces.  One of

16  the most important parts is that we want to make sure that

17  blended plug-in hybrids are part of the program.  And so

18  some changes is needed at least for that reason and a lot

19  of other reasons that were explained.  So I think I would

20  like to suggest that the focus of this discussion be as

21  much as possible on this 2012 to 2014 time period fixing

22  what we have here, trying to make it a little better.

23           But that we within a year begin a process of

24  starting from scratch, overhauling this whole ZEV program.

25  And what that would mean is essentially spinning off what

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 1  we call the bronze category, which are essentially very

 2  clean gasoline vehicles, spin that off to a LEV III

 3  program.  Spin off the silver category which is mostly

 4  hybrid vehicles as well natural gas into the Pavley 1493

 5  program, because it's in commercial production.  It's no

 6  longer appropriate I don't think for a ZEV mandate type

 7  program to be influencing and micro managing the

 8  development of gasoline hybrids.  So spin that off to the

 9  Pavley 1493 program when that is enforced and implemented.

10           And that ends up with us being focused back on

11  what the real focus of this ZEV program was from the

12  beginning.  And I think what's appropriate for the focus

13  to be now, and that is on battery EVs, plug-in hybrids,

14  and fuel cells and come up with a much simpler program.

15  And I would just say to make people feel comfortable with

16  it this should be at least as aggressive as this phase

17  four program in the current proposal.  In other words, the

18  2015 to 2017, which I don't think we're going to talk

19  about a lot today.

20           And so I would suggest that there will be some

21  discussion of course.  But that this new program would

22  focus on that period, would be simplified, would be

23  aggressive.  And when I say aggressive, I think one of the

24  things that all of us have become very concerned about --

25  and this is the reason for transforming the ZEV program is

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 1  that historically it was premised on conventional local

 2  pollutants.  But now with the advent of climate change and

 3  AB 32 and the focus on reducing greenhouse gases,

 4  increasingly many of us believe that the ZEV program

 5  should be more and more focused on reducing CO2 and

 6  greenhouse gases.  And importantly as we look at the 2020

 7  requirements and targets beyond that, we need dramatic

 8  reductions in CO2 and greenhouse gases from the

 9  transportation sector.  And that calls for a very much

10  accelerated commercialization of these ZEV technologies.

11           So I think as we think about it, if we agree to

12  this transformation, the focus would be on accelerating

13  the development of these very low carbon electric drive

14  technologies at least as fast as what's already in it.  I

15  would argue considerably faster even.  But that would be

16  part of the review.

17           And so, you know, to just kind of end my thoughts

18  here -- and I provide that as a context because I think as

19  we go on here we need to have some focus on what exactly

20  we're talking about and what are we going to do with this

21  hugely complicated ZEV program that we have now.

22           You know, one other thought is that as we go

23  forward, the ZEV program, at least in my mind,

24  philosophically is a program to jump start these very

25  promising technologies.  It shouldn't be a permanent

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 1  program.  We all have the Pavley program in place.  We'll

 2  have the LEV III program in place.  These have performance

 3  metrics.  And I think that's the best way to guide the

 4  commercialization of these technologies.

 5           But there is a need.  There are real barriers.

 6  There are real challenges to getting these battery EVs,

 7  plugs-in's, and fuel cells in the market.  There are none

 8  on the market now.  And there's really not any really firm

 9  announcements even to do so in a commercialization sense.

10  So the role of this is to kick start these technologies,

11  and that's what the program should be.  And you know, if

12  battery EVs become successful at some point in the future,

13  we call it a success and we don't have to continue with

14  ZEV mandate for it.

15           And so the last piece of that of course will be

16  that we need to stay focused on developing incentives as

17  was presented in the staff report.  And I think all of us

18  should be committed to helping provide incentives to

19  consumers and to the industry to bridge this gap.  Because

20  these technologies are going to be very expensive for some

21  period of time.  And, you know, these are in the public

22  interest.  So there is a responsibility to provide some of

23  these incentives to make it work.

24           CHAIRPERSON NICHOLS:  Thank you.  I'm going to

25  treat the substance of your comments as a resolution --

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 1  motion to support a resolution.  And I'm going to second

 2  it.  But I'd like to table it for discussion until after

 3  we've completed today's business.

 4           But I do think there's a few other framing

 5  comments that deserve to be made.  And I'd like to call on

 6  Board Member D'Adamo who was here at the last Board

 7  meeting and has some thoughts.  I think we should hear

 8  from too.

 9           BOARD MEMBER D'ADAMO:  Thank you.  Feeling a

10  little bit like a veteran today, having been through this

11  not just once before but twice.

12           What I'd like to do is maybe put things in

13  context a little bit more, especially where I'm coming

14  from, because I was a critic of the 2003 amendments.  I

15  was in the minority and actually opposed the amendments

16  because I felt we'd be back sometime soon with a request

17  by industry to again change the numbers.  And so I think

18  some of what the minority of us at that time has

19  actually -- what we predicted has actually occurred here.

20           I'd like to though echo some of the comments of

21  Professor Sperling before getting into some specific

22  recommendations.  I really do want to compliment staff for

23  its very hard work.  I know staff has been so very

24  dedicated to this program.  In fact, when I came on the

25  Board in 1999, one of the first individuals that contacted

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 1  me was Tom Cackette.  It was important to him that I be

 2  brought up to speed about the very important and visionary

 3  ZEV mandate.

 4           So what I'm about to say I just want to

 5  underscore that it's not meant to be critical of staff in

 6  any way.  I think I'm just coming at this from a different

 7  point of view.  Not being a technical expert, not really

 8  understanding as Professor Sperling does the intricacies

 9  of what's technologically feasible and also not coming

10  close to understanding the complex accounting system, I

11  have always approached this with taking several steps back

12  and looking at it from a much broader policy perspective.

13  That's where I'm coming from today.

14           So in 2001 when I first had an opportunity to

15  vote on the ZEV mandate, it was rather clear that where we

16  were headed was to push forward with the vision,

17  especially on battery electric.  Back then, we weren't

18  talking much about fuel cell.  There was the Fuel Cell

19  Partnership.  And that was the focus at that time on fuel

20  vehicles.  So the focus was clearly battery electric and

21  on the number of battery electric vehicles that we hoped

22  would come into the marketplace.

23           The focus in 2001 was to provide for flexibility

24  in terms of the credit scheme.  And that's exactly where

25  we ended up.  But in the end, we did whittle away at the

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 1  numbers.

 2           And then 2003, the focus became this alt path and

 3  providing another path to the auto makers for fuel cells

 4  with significantly reduced numbers.  And I want to

 5  underscore that again.  Significantly reduced numbers in

 6  2003.  But the idea being that there would be another

 7  alternative for those that wanted to pursue fuel cell

 8  technology, but the battery path was still quite available

 9  but the numbers were much higher.  So in order to give on

10  the fuel cell side and the reduction in numbers, we I

11  thought were going to receive vast improvement in terms of

12  technology.  So that's why we reduced the numbers.

13           And so now here we are today looking at another

14  round of changes.  And we are suddenly -- my feeling is

15  we're just looking at that alt path as the base line.  But

16  the true base line is the base path.  And those numbers

17  are much higher than 25,000.  In fact, if we go back and

18  look at the base path from 1990, I don't know what it

19  would be.  But it would be along the lines of -- well, I

20  think at 2001 perhaps staff could comment on this later.

21  But I think in 2001 it was at least 45,000 which is what

22  we would be looking at now.  I wouldn't venture to guess

23  what the numbers would be if we looked all the way back to

24  1990.

25           So I think it's important for us a realize that

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 1  whatever changes we make on the numbers that we can

 2  consider those numbers are low to begin with because there

 3  was an expectation in huge costs that would be associated

 4  with fuel cells.

 5           So I would like to just outline a couple of areas

 6  where I think that we can be more visionary and exercise

 7  more leadership here than what's being proposed.

 8           First of all, I think it's important in that

 9  phase three to phase four time frame that we not fall off

10  the cliff, which is what got us here to begin with in

11  phase three.  The numbers ramped up to 25,000, and it is

12  clearly a challenge for the auto makers to reach that

13  25,000.  I think in phase four those numbers jump up to

14  50,000.  And what's being proposed here today doesn't deal

15  with the transition in between those two periods of time.

16           And so although I fully embrace Professor

17  Sperling's comments that we need to transform this program

18  and have spin-off in terms of LEV and Pavley for the

19  bronze and silver categories, but I do think we need to be

20  mindful of that transition period between phase three and

21  phase four.  I don't think we should just assume that

22  somehow those numbers can be ramped up to 50,000 or

23  whatever we end up with.  I think we have to have a

24  gradual ramp up so we're not all back here in a couple of

25  years from now with the call for making some additional

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 1  changes.  Because it's just not attainable.

 2           So even in the event we do transform the program,

 3  which I think we should, I think we should plan for a ramp

 4  up so that -- we just don't know how it's going to turn

 5  out.  I think it's important for us to have some leverage

 6  in this program as we move into the future.  So I would

 7  support increasing the numbers.  Right now, the number in

 8  phase three being 25,000 I think we should ramp up to

 9  40,000 in the out years of phase three.

10           Another area that I think we can do much better

11  on is on the floor.  We're looking at numbers of 2,500.  I

12  think that we don't even know what those numbers really

13  mean in terms of banked credits and also with the back

14  fill.  I think those numbers should be much higher.  They

15  should be more along the lines of 10,000.  The reason I

16  say that again is because we're including batteries in the

17  mix and those numbers were low to begin with because we

18  were looking at fuel cells.  I do think we need to bring

19  batteries back, and the way to bring them back is to have

20  a higher floor.

21           Another area that I think that --

22           (Applause)

23           CHAIRPERSON NICHOLS:  I appreciate if you would

24  hold applause.

25           BOARD MEMBER D'ADAMO:  Another area that I think

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 1  that we need to seriously consider is this issue of

 2  intermediate manufacturers.  They've had plenty of time to

 3  know that this requirement was coming upon them.  Their

 4  numbers ramped up over a period of years, and I don't

 5  think that they should be given any additional time.

 6           I did favor at one time some way to have an

 7  incentive so that if they somehow include some vehicles in

 8  the market before that transitionary period is over that

 9  this be given some additional time.  But for a variety of

10  reasons, it really doesn't appear that that will work out.

11  So I would favor no additional no changes to intermediate

12  volume manufacturers.

13           Another area that I think that we really should

14  start looking into -- and I don't have any specific

15  suggestions here just yet -- but that has to do with

16  infrastructure.  We've had this ongoing problem with a

17  lack of infrastructure, and I just don't think that we're

18  taking enough advantage of incentives we could offer.  I

19  do think it's the responsibility of the fuel providers to

20  provide for the infrastructure.  But in the mean time, I

21  do think we ought to consider some form of credit to the

22  auto makers for those that do provide for the

23  infrastructure.  So I don't know if this would be the

24  appropriate time or not, but I think we should mull this

25  over at today's hearing.

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 1           And additionally I think we ought to consider --

 2  I don't know what the vehicle would be -- but I think we

 3  ought to consider an infrastructure requirement on the

 4  fuel providers.  It's about time that they participate in

 5  this program, and I think that the best way to do it is to

 6  provide a mandate such as we have with the auto makers.

 7           Another area that I feel pretty strongly about is

 8  this issue of transparency with credit.  In order to have

 9  a meaningful dialogue, it needs to be fully transparent as

10  far as not just the credits that the auto makers have, but

11  any trading that's going on in order for us to understand

12  the impact of this program and the actual numbers of

13  vehicles.  So when I say there should be a floor of

14  10,000, I would really like to be able to know how many

15  actual vehicles are we going to get on the road.  And the

16  only way we can do that is to have transparency with the

17  entire program so that the stakeholders can review those

18  numbers and comment on what they believe the real numbers

19  ought to be.  That I think will give us as a Board the

20  best opportunity to provide for improvement.  And where we

21  do need to make adjustments, we would have a better

22  understanding of what those adjustments actually mean.

23           So just fuel for thought here on some

24  suggestions, and I look forward to hearing from the

25  witnesses.

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 1           CHAIRPERSON NICHOLS:  Thank you very much for

 2  laying out some considerations.  When the appropriate time

 3  comes, I think a number of us are going to be looking for

 4  ways to strengthen this proposal, including the numbers of

 5  vehicles we're talking about.  So I expect we'll hear

 6  suggestions about how we should be doing that, because it

 7  is complicated.  But I'm certain that that's going to be

 8  part of our discussion.

 9           Are there other Board members that would like to

10  put some additional thoughts out here now?  Yes, Mayor

11  Loveridge.

12           BOARD MEMBER LOVERIDGE:  I'm here to listen to

13  the 64 plus people who identified readiness to speak.  But

14  I guess my own personal bias is to try to see if we can

15  get vehicles out of the lab and onto the street.  Identity

16  the goals of air quality.  We identity the goals of global

17  warming and greenhouse gas.  We've identified the goals of

18  technology forcing.  I just want to put another goal out

19  there which I think is the political stage we're now a

20  part of.

21           It's also a national security issue.  The last

22  five years, the cost of gasoline has gone from $25 to well

23  over $100.  We've seen the greatest transference of wealth

24  in the history of mankind from our country to other places

25  in the middle east.  I think the new administration, no

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 1  matter who it is, is going to see a major national

 2  security emphasis on looking for alternatives to gasoline.

 3           CHAIRPERSON NICHOLS:  Thank you for that

 4  reminder.  And I think the point that was made in the

 5  staff presentation about the other state programs that are

 6  focused on trying to get us as a state off of our extreme

 7  dependence on imported oil really do need to be brought

 8  into the equation here.  I know we've been working with

 9  the Energy Commission on developing plans for

10  implementation AB 118.  It was a significant measure

11  signed by the Governor last year with money attached to it

12  that comes from an increase in vehicle registration fees.

13  And it's going to be an ongoing large amount of funds that

14  we hope to help leverage in the direction of working

15  through this program as well.  So it's very important

16  reminder.

17           All right.  Well, without further ado then, I'm

18  going to call witnesses in groups and ask you to come

19  forward and be prepared to testify when your time comes.

20  And we're going to begin with David Greene, followed by

21  Sigmund Gronich, Robert Cassidy, Dave Flanaghan, and

22  Richard Kelly.  If you want to line up at one side.  And

23  then Andrew Simpson, Sara Rudy, Andrew Frank, Earl

24  Killian, and Mark Geller.  That will get us through our

25  first ten witnesses.

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 1           And I should say while you're all assembling that

 2  we have received the written submittals in advance.  I've

 3  have the opportunity to read them.  Some of them are

 4  similar and identical.  Some are very different and very

 5  substantive.  We would appreciate it if you do not read

 6  your prepared testimony if you submitted it because we

 7  will have read it and it will be in the record.  We also

 8  would appreciate it since the time is limited if you would

 9  focus as much as possible on the specific recommendations

10  you have about what the Board should do as opposed to

11  general statements about support or opposition.

12           We'll start out with Mr. Greene then.

13           (Thereupon an overhead presentation was

14           presented as follows.)

15           MR. GREENE:  My name is David Greene.  I'm a

16  corporate fellow at Oakridge National Laboratory.  I'm

17  here at the request of the Department of Energy's Hydrogen

18  Fuel Cell Infrastructure Technology Program to bring to

19  the attention of the Board a study conducted last year

20  that's just been published on the transition to hydrogen

21  in transportation.

22                            --o0o--

23           MR. GREENE:  And the importance of scale

24  economies I'm learning by doing in making that transition.

25           Like any analysis, ours is strongly dependant on

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 1  assumptions and premises.  These are key premises of the

 2  study that the R&D goals of the DOE program are met on

 3  time, 2010 and 2015.  Those are ambitious goals that our

 4  hydrogen costs are based on DOE's state-of-the-art

 5  hydrogen supply model.  We assume the energy information

 6  administration's high oil price case, which looks like a

 7  low oil price case from today's perspective, but

 8  nonetheless.  And we have three scenarios of which I will

 9  talk mainly about the second one.  They are assumed,

10  constrained, and then from 2025 to 2050 a market

11  simulation is carried out.

12                            --o0o--

13           MR. GREENE:  This shows the rate of penetration

14  of vehicles.  Fuel cell vehicles are in the scenarios

15  initially concentrated in a few regions.  The key regions

16  is Los Angeles area and the rest of the pacific coast.

17  Fuel cell production in the scenario reaches 60,000 units

18  per year in the scenarios two and three which I'll be

19  talking about.

20                            --o0o--

21           MR. GREENE:  The cost of fuel cell vehicles comes

22  down very rapidly partly depending on the advantage in

23  technology but mainly depending on annual production

24  volume and learning by doing.  We obtained proprietary

25  information from manufacturers on cost as a function of

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 1  scale and a function of cumulative production.  And we fit

 2  it to these scale elasticities on the order of -.28.  A

 3  progress ratio for learning by doing of -.9.  These are

 4  fairly typical of technologies found in the literature.

 5  And our cost estimates as shown here are consistent with

 6  what the manufacturers believe and were approved by them.

 7           Next.

 8                            --o0o--

 9           MR. GREENE:  One of the features of our study was

10  to calculate the cost to the industry of the transition.

11  These graphs show the costs to the automotive

12  manufacturers if, for example, they were required by

13  mandate to supply the number of vehicles shown.  And there

14  is a very large and prolonged period of excess cost to

15  them.  Billions of dollars of losses over 10 to 15 year

16  period.

17           We also explore the potential for government

18  policies to absorb these costs.  And essentially the

19  second graph here shows a policy that more or less holds

20  the industry harmless throughout that period.

21           Next slide.

22                            --o0o--

23           MR. GREENE:  And this shows the cost to the

24  government which peak at about four billion dollars a

25  year.  And the cumulative cost of this scenario reached

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 1  $25 billion a year.  These we think are practicable costs

 2  from the perspective of the national government, but do

 3  require both not only that states like California and the

 4  northeast states do their program but the federal

 5  government also do its part.

 6                            --o0o--

 7           MR. GREENE:  Now, although this analysis is

 8  dependant on many assumptions, we think there are some key

 9  insights.  First is that driving down costs by scale

10  economies I'm learning by doing is essential to reaching

11  competitive cost targets for hydrogen fuel cell vehicles.

12           Meeting the technology goals is also very

13  important, but in sensitivity analysis we found that we

14  don't necessarily have to hit exactly the goals for

15  storage and for fuel cell costs.  Some deviation is

16  possible with still a chance of success.  But it does

17  appear that government cost sharing and at a national

18  scale a program to promote the development of

19  infrastructure will be necessary in order to overcome the

20  natural barriers of fuel availability, make and model

21  availability scale, and learning by doing.

22                            --o0o--

23           MR. GREENE:  I'd like to thank you for the

24  opportunity to make these remarks and point out that the

25  reports that I referred to are available on line.  Thank

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 1  you.

 2           CHAIRPERSON NICHOLS:  Thank you very much.

 3           Mr. Gronich.

 4           MR. GRONICH:  Thank you.  I previously worked at

 5  the Department of Energy for the last ten years in the

 6  hydrogen program.  I'm now retired and a Californian and

 7  proud to be a Californian looking at the work that

 8  California is doing.

 9           The next slide.

10                            --o0o--

11           MR. GRONICH:  We do need a policy to stabilize

12  the environment.  It's very important.  But we need to be

13  realistic.  We have to understand the vehicle costs will

14  be higher to these advantaged technology vehicles.  But in

15  reality, fuel costs are likely to be lower, both the

16  hydrogen and electricity.  As a society, we have to

17  understand that the long-term cost effectiveness of

18  achieving AB 32 goals is paramount.  We need a balanced

19  social policy.  Mandates by themselves do not ensure that

20  industry can sell the vehicles to the public at the cost

21  of the vehicles.  What we need is both a stick regulation

22  and cost share by the government to work in concert

23  requiring both state and federal cooperation.  I think

24  that is essential.

25                            --o0o--

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 1           MR. GRONICH:  We need to let the marketplace

 2  decide.  All low carbon emission vehicle technologies have

 3  risk.  And the lowest cost option is unknown.  Policy

 4  support is needed to bring all these vehicles to the

 5  marketplace so that consumers can select and the cost to

 6  society can be minimized.

 7           What is needed for hydrogen fuel vehicle

 8  vehicles?

 9                            --o0o--

10           MR. GRONICH:  I want to cover these points.

11  Hydrogen fuel cell vehicles can be competitive with

12  relaxed 2007 DOE targets when they are competing against

13  plug-in hybrids and battery electric vehicles.  They are

14  all going to be more expensive than your traditional

15  vehicles.

16           The ARB's expert panel was conservative in that

17  they made their recommendations on meeting 2015 DOE

18  targets.  There is a very excellent report by Cromer and

19  Hayward.  They talk about storage system costs that are

20  seven times more than the DOE 2015 targets and fuel cell

21  costs of 50 to $75 a kilowatt.

22           A policy that is put forward needs to include an

23  understanding of what it's trying to do, whether it's in

24  technology development or trying to get to

25  commercialization.  Looking at economy of scale

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 1  strategies.

 2           I believe that there should be a review in 2009

 3  of the progress in fuel cell vehicles against these

 4  revised 2010 targets.  If that is positive, then it is

 5  possible to consider mass production of fuel cell vehicles

 6  by 2015.  And I'm trying to put forward that 2015 to '17

 7  is actually the critical time period, more so than 2012 to

 8  2014 with the technologies still in technology

 9  development.

10           As David went through --

11           CHAIRPERSON NICHOLS:  Your time is up.  I'm

12  sorry.  We do have your written presentation.  And I think

13  the bottom line here is that we understand your

14  recommendations for how to better, you feel, bring on the

15  hydrogen fuel cells.

16           MR. GRONICH:  I would say the 2012 to '14 period

17  is well constructed by the staff.  There needs to be

18  additional attention paid to 2015 to '17.

19           CHAIRPERSON NICHOLS:  Thank you very much.

20           Mr. Cassidy.

21           MR. CASSIDY:  Madam Chairman, members of the

22  Board, I'm Bob Cassidy.  This morning I'm representing the

23  Nissan Technical Center and Nissan North America

24  United States and Nissan Motor Limited Japan.

25           It's my pleasure to first began by describing

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 1  Nissan's battery electric vehicle programs.  We have

 2  announced the introduction of battery electric vehicles in

 3  2010 in the United States and Japan.  We will follow that

 4  up with program in 2011 in Israel as part of Project

 5  Better Place.  We are also pleased to announce in 2012 we

 6  will have a new global electric vehicle which will impress

 7  us all.  We think this vehicle has great merit and it is

 8  our full commitment to make this mandate in battery

 9  electric transportation a success.

10           Based on this preview of our plans, I'd like to

11  now comment on the regulations as they're proposed.

12  Nissan endorses the proposed amendments as articulated in

13  the 45 day notice.  We think this is the careful blend

14  between technology forcing and feasibility.  We support

15  that.

16           We see the drive towards more vehicles as

17  challenging and perhaps a direction that we really don't

18  want to take.  We have a program in place that promises

19  success.  We think we're bringing you success.  And we

20  would look to achieve that.  If we can over achieve, we're

21  very pleased to do that.  Ms. Nichols, as you pointed out,

22  the floor does not mean that's the max.  That's the min.

23  We're would certainly encourage targets higher than that.

24  We also like to maintain some flexibility in our program

25  with our global launch, and the current regulation allows

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 1  us to do that.

 2           In terms of some of the other issues which we've

 3  been discussing, Nissan certainly supports parity between

 4  electric vehicles and fuel cell vehicles.  We fully

 5  support the public disclosure issue that has been raised

 6  and as articulated in the language.  Nissan would further

 7  support disclosing the names of trading partners and also

 8  those selling credits.  We understand the issue of

 9  transparency and support it completely.

10           Last, on the intermediates, current regulation,

11  they got three years they know they're intermediate.  They

12  have another five or six to do it.  I think that's enough.

13           So in parting, we're offering you success.  We

14  ask for your support.

15           CHAIRPERSON NICHOLS:  Thank you for your

16  comments.

17           Mr. Flanaghan.

18           MR. FLANAGHAN:  Good morning.  My name is Dave

19  Flanaghan, and I am the automotive general manager at UTC

20  Power.  We appreciate an opportunity to speak today.

21           We've also submitted a written statement, but my

22  comments today will be a summary of that statement.  UTC

23  has been producing fuel cells for over 50 years in on-site

24  transportation and space applications.  In transportation,

25  we have worked with many of the world's leading automotive

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 1  manufacturers to develop fuel cell technology and fuel

 2  cell vehicles.

 3           UTC, along with its partner Chevron and Hyundai,

 4  will be operating 32 fuel cell vehicles under the

 5  Department of Energy's hydrogen learning program, and 27

 6  of these vehicles will be operating in California.

 7           We have 21 vehicles on the road in California

 8  today with over 10,000 hours of operation and 200,000

 9  miles.  UTC is also powering six fuel-cell powered buses.

10  Three of these buses are located at AC Transit in Oakland

11  and one at Sun Line Transit in Palm Desert.  These buses

12  have more than 10,000 hours of operation and 100,000

13  miles.

14           CARB's vision and leadership in zero emission

15  technology has served as a catalyst for substantial

16  investment and progress in the commercialization of fuel

17  cell vehicles.  California's initiatives have been

18  instrumental in the deployment of fuel cell vehicles that

19  have achieved over one million combined miles by members

20  of the California Fuel Cell Partnership.

21           UTC has been a strong and consistent advocate of

22  California ZEV activities and the positive impact they

23  have made in technology development.  The ZEV rule is

24  ground braking and has been followed by 12 other states.

25  While it might be tempting to put a greater emphasis on

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 1  enhanced advanced technology PZEVs and battery EVs as an

 2  interim step, to remain a leader in ZEV initiative,

 3  California must not lose focus on hydrogen power

 4  transportation.

 5           Therefore, UTC opposes changes to the current

 6  legislation that would dilute or delay the requirement for

 7  pure ZEVs and infrastructure.  We believe the regulation

 8  should be founded on performance-based metrics were a

 9  definition of zero is not up for debate.  Any wavering or

10  definition of zero or program delays will send a strong

11  signal to stakeholders that are currently working on fuel

12  cell vehicles.  Investment capital, component

13  manufacturers, vehicle OEMs, energy suppliers are heavily

14  influenced by CARB ZEV decisions.  Any effort to slow the

15  ZEV initiatives will likely result in a major shift in

16  investment away from pure ZEVs and infrastructure.

17           Significant progress has been made towards the

18  ZEV commercialization, and changes made to the regulation

19  must not affect their introduction.  It is essential that

20  all proposed changes to ZEV regulations be carefully

21  considered along the long-term state goals and the

22  potential for creating even further delays down the road.

23           CHAIRPERSON NICHOLS:  Thank you.  Your time is

24  up.

25           Mr. Kelly.

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 1           MR. KELLY:  Chairman Nichols and members of the

 2  Board, my name is Richard Kelly.  I'm a production battery

 3  electric vehicle driver, and I spoke at the May 2007

 4  meeting.

 5           I want to comment on one of the less discussed

 6  provisions in the staff's proposal.  In 2003, this Board

 7  under Alan Lloyd became concerned about the multiplicative

 8  effects of its own legislation across the country as

 9  others states adopted our ZEV regulations.  These states

10  are referred to as Section 177 states.  So this Board

11  created the travel provision which allows ZEVs placed in

12  one state to account towards compliance in California.

13           It was supposed to sunset in 2012. The stated

14  rational for this provision was to allow manufacturers of

15  lower production volume until the technology is

16  commercially available or viable.  However, this provision

17  simply does not work, and it is just one example of bad

18  legislation contained in this proposal.

19           This Board which is tasked with maintaining

20  healthy air quality in California is concerned about

21  whether other states will ask for ZEVs as well.  Why is

22  this an issue when this Board should be focusing on

23  California?

24           You legislated that a ZEV placed in Massachusetts

25  would count as a California ZEV.  What good does a ZEV in

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 1  Boston do for air pollution in Los Angeles?  The core

 2  problem is this legislation reduces the overall number of

 3  ZEVs in California and nationwide.

 4           Arthur Marin, Executive Director of the Clean Air

 5  Association of the northeast states wrote the following to

 6  CARB in May of last year.  "By creating uncertainty as to

 7  the volumes and locations of future vehicle placements,

 8  the travel provision could hinder the development of

 9  refueling infrastructure that is a prerequisite to

10  successful commercialization of Type 3 ZEVs."  He realized

11  that this travel provision meant that no state could know

12  if they would be to ones to win the ZEV lottery or not.

13  How do they plan for their own fueling infrastructure?

14           As soon as CARB opened up this loophole, the auto

15  makers jumped right through.  EV advocates started hearing

16  about ex-California EV ones being trucked over to New York

17  and Massachusetts.  These EVs had been on California roads

18  for more than three years.  They had earned California

19  in-service and would now earn ZEV credits in another

20  state.  The auto makers gamed CARB and doubled the credits

21  the vehicles deserved.

22           Finally, most if not all the ZEVs manufactured

23  and placed on the road in California were done so before

24  2003.  This provision has not had the effect in incenting

25  manufacturers to produce fleets of EVs.

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 1           So the travel provision does not encourage

 2  production of EVs.  It interferes with the state's ability

 3  to deploy fueling infrastructure.  It opens up a loophole

 4  the auto makers are more than happy to exploit.  And it

 5  was simply bad legislation.  After all this, one would

 6  think staff would retract the provision or at least let it

 7  expire as scheduled.  But no.  Last year, staff

 8  recommended extending it until 2015.  And now staff is

 9  proposing extending its to 2017 for some ZEVs.  They want

10  to extend a failed provision.  This is why the public

11  perception is that CARB is back sliding with this

12  proposal.

13           In Ms. Bevan's presentation, the only pro

14  argument offered for this travel provision was that it

15  eases the pressure on auto makers.  CARB persists in

16  wanting to get more auto out of auto makers by asking for

17  less.  This is ridiculous as anyone can see.  The only

18  time any significant number of ZEVs were placed on the

19  road in California was when CARB asked for a lot.

20           Chairman Nichols, you have stated you wish to get

21  this program back on track.  Why not start by rejecting

22  ineffective legislation such as the travel provision?

23  Thank you.

24           CHAIRPERSON NICHOLS:  Thank you.  You made it

25  just on time.

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 1           Andrew Simpson.

 2           (Thereupon an overhead presentation was

 3           presented as follows.)

 4           MR. SIMPSON:  Good morning, members of the Board.

 5  My name is Andrew Simpson.  I'm an engineer at Tesla

 6  Motors, and we are the sole manufacturer of full

 7  performance zero emission vehicles in the country and in

 8  this state.  Several of you have driven our cars, so you

 9  know they're real.

10           Next slide.

11                            --o0o--

12           MR. SIMPSON:  We are here today to testify that

13  zero emission vehicle technology is ready for the market.

14  And by ready for market we mean the technology provides

15  sufficient performance and utility such that it can be

16  packaged into attractive cars that motorists are ready and

17  willing to buy today.

18           Based on this market readiness, we feel there is

19  no justification to reduce the proposed required numbers

20  of fewer ZEVs.  And if anything, you should increase the

21  requirement.

22           Next slide.

23                            --o0o--

24           MR. SIMPSON:  Our market readiness has been

25  enabled by advances in automotive lithium ion technology,

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 1  by ourselves, and by our competitors.  In terms of our

 2  specific achievements, we've developed a 120 watt hour per

 3  kilogram battery system, including charge and thermal

 4  management, that has more than twice the energy storage

 5  density of previous generation technology and also exceeds

 6  criteria established by the DOE for market readiness.

 7  Furthermore, our battery is so safe you can ship it by air

 8  as certified by the UN.

 9           We've also developed an adaptable on-board

10  charging system that allows motorists to get full recharge

11  in as quickly as four hours with no additional need for

12  infrastructure.

13           Using the technology, we developed the fully

14  certified 227 mile Tesla Roadster, and it competes on its

15  merits of price and performance in its target market

16  segment.  We have already pre-sold 1,000 cars.  We started

17  production of the roadster on March 17th and will ramp up

18  to 1,800 units in 2009.

19           Next slide.

20                            --o0o--

21           MR. SIMPSON:  Automotive lithium ion technology

22  is on a rapid trajectory that will soon penetrate more

23  segments of the market.  In the past ten years, the

24  performance has doubled as you see and the price has

25  decreased by a factor of four.

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 1                            --o0o--

 2           MR. SIMPSON:  We plan to leverage these advances

 3  in 2010 and commence production of a sports sedan, ramping

 4  up to a volume of 10,000 cars per year.  By this time,

 5  however, we hope to have some competition.  Mitsubishi,

 6  Nissan, Subaru, Daimler, and Think have announced

 7  production plans to launch full function electric vehicles

 8  within the next two years.  But this regulation will

 9  determine whether or not they are available to

10  Californians, I think.

11           Next slide.

12                            --o0o--

13           MR. SIMPSON:  So during the next two phases,

14  phases three and four -- two and three, Tesla expects to

15  produce and sell approximately 40,000 full function zero

16  emission vehicles in the state of California.  But we're

17  just one player, and we're a small one too.  Yet, we will

18  greatly exceed the requirements.

19           The only reward we get for placing ZEVs in this

20  state is the incentives provided by this regulation.  So

21  if the mandate is weakened as proposed, it will

22  disadvantage our company.  It will delay the introduction

23  of ZEVs.  And it will redirect industry's capital onto

24  other technologies.

25           So we ask you please strengthen the mandate.  The

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 1  technology is ready, and it deserves your support so that

 2  Californians can breathe clean air as soon as possible.

 3  Thank you.

 4           CHAIRPERSON NICHOLS:  Thank you.  Thanks for the

 5  opportunity to drive that wonderful car, too.  I didn't

 6  have my $100,000 check with me, but any day now.

 7           Ms. Rudy.

 8           MS. RUDY:  Chairman Nichols, members of the

 9  Board, appreciate the opportunity to comment on the

10  California zero emission vehicle regulations.

11           The ZEV regulation is technology forcing and has

12  needed to be modified on numerous occasions because the

13  expectations have not been met.  We are here again today

14  based on the feedback from the independent expert review

15  panel with the need to revise the regulation again to

16  implement a program that furthers the ARB's goal.

17           Ford believes the ARB is moving in the right

18  direction by emphasizing zero emission technology that is

19  closer to commercialization.  We also feel that

20  significant progress has been made on zero emission

21  technology such as fuel cells and advanced batteries.

22  However, pushing this technology into the market before

23  they are commercially viable ties up resources that could

24  be better utilized advancing the core technologies.

25           It is important at this state to be nimble and to

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 1  apply the lessons learned from a few vehicles to the next

 2  generation of prototypes.  However, if the ARB decides to

 3  force high volumes, we believe more is needed to enable

 4  progress.  We believe all stakeholders, including

 5  automotive manufacturers, technology suppliers, energy

 6  providers, research laboratories, the government, and the

 7  consumers should work collaboratively and be fully

 8  committed to achieving the high volume goals of the ARB.

 9           There are now 13 states that have adopted

10  California's lower emission vehicle regulation.

11  California needs to consider these states when setting

12  their aggressive targets.  Ford supports the so-called

13  travel provision in recognition of the substantial

14  resources needed to bring these vehicles to mark.

15  However, we believe a transition is needed to phase out

16  the travel provision.  Otherwise, the step function change

17  from one phase of the program to the next is too

18  overwhelming.

19           We appreciate the ARB's provisions to recognize

20  blended operation plug-in hybrids.  However, we believe

21  blended operation plug-in hybrids should be on more equal

22  footing with all-electric range hybrids.  Furthermore, we

23  believe a simplification of the plug-in credit

24  calculation, and we have recommendations in our written

25  comments.

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 1           The ZEV regulations are designed to be technology

 2  forcing, but it is difficult to judge the pace of

 3  technology.  We recommend that the Board initiate another

 4  review in a couple of years to assess the 2015 model year

 5  and beyond requirements.

 6           In light of the technology uncertainty, it is not

 7  appropriate to apply a no back sliding rule in the future

 8  when such aggressive targets are set.  In conclusion, Ford

 9  supports the ARB's goal for a sustainable zero emission

10  vehicle transportation system.  However, we believe a

11  collaborative approach that commits and holds accountable

12  all stakeholders is a more viable approach than just large

13  volumes of vehicles on the road.  Thank you.

14           CHAIRPERSON NICHOLS:  Thank you.

15           Mr. Frank.

16           (Thereupon an overhead presentation was

17           presented as follows.)

18           MR. FRANK:  Many of you know me.  And I've been a

19  proponent of the plug-in hybrid for probably 20 years or

20  30 years.  But I'm glad to see it all come to a major

21  consideration here at CARB for the ZEV program.  But I

22  just have a quick few slides and I probably will not use

23  my three minutes.

24                            --o0o--

25           MR. FRANK:  The next slide shows the technology

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 1  for battery electric vehicles is here and plug-in hybrids

 2  especially.  So here are 13 vehicles that are planned for

 3  production and production dates.

 4           And as already mentioned, Nissan and a whole

 5  bunch of other car companies are also planning to

 6  introduce battery electric vehicles.  So we don't need to

 7  lead the industry any more in this area.

 8           Next slide.

 9                            --o0o--

10           MR. FRANK:  So what is the problem?  The problem

11  is petroleum displacement.  I think Ronald Loveridge

12  mentioned the real big issue is petroleum displacement and

13  greenhouse gas emissions are much more critical issue

14  today facing our society.  Why is that?  Price of gasoline

15  is probably going to cause massive disruption in our

16  society if we don't have an alternative for

17  transportation.  So the key is what transportation do we

18  have?  And fundamentally it's electricity.

19           One thing that has not been mentioned is that the

20  price of electricity in a car is about the price of

21  equivalent of 70 cents a gallon of gasoline.  That's going

22  remain constant as the price of gasoline rises.  Why not

23  get these numbers that CARB is proposing here, get them

24  up?  Get them up high enough so that we can begin -- CARB

25  can begin to lead industry towards faster introduction,

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 1  much faster introduction into battery electrics and

 2  especially using electricity.

 3           Next slide, please.

 4                            --o0o--

 5           MR. FRANK:  Now, specific suggestions.  I'd like

 6  to suggest changes in the ZEV definition.  That's

 7  something that has not been viewed or discussed.  We

 8  should define ZEV as that -- miles achieved of ZEV.  What

 9  that does, is opens the door to hybrids and other new

10  technologies.  So for a plug-in hybrid, for example, we

11  could define ZEV as all-electric range.  All-electric

12  range fits with Tesla and pure electric cars as well.

13           CHAIRPERSON NICHOLS:  You have used up your three

14  minutes.  Sorry.

15           MR. FRANK:  Anyway, so all-electric range.  Okay.

16  Let me go to one final slide.

17           CHAIRPERSON NICHOLS:  Just last slide.

18                            --o0o--

19           MR. FRANK:  So the most important thing is that

20  CARB use the successful formulas of the past to structure

21  ZEV rules and get the vehicle numbers up.

22           And one thing I suggest that you not forget, and

23  that's solar and wind.

24           Last slide, please.

25                            --o0o--

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 1

 2           CHAIRPERSON NICHOLS:  That was the in conclusion

 3  slide.  All right.  Thank you very much.

 4           Mr. Killian.

 5           MR. KILLIAN:  Yes.  Earl Killian.  I'm here as an

 6  individual.  Basically, I represent a beneficiary of what

 7  Dr. Sperling called the first CARB kick start.  I'm a RAV

 8  4 EV driver.  And primarily my purpose today is, you know,

 9  to put in a plug that you look at the written comments

10  that I submitted.

11           I particularly support, Chair Nichols, your

12  comments about tilt.  And my concern and the reason I'm

13  here today is that I see that CARB is actually having a

14  tilt, a tilt towards fuel cell vehicles that I think is

15  inappropriate.  I would rather see a more level playing

16  field.  So I fully support what you called for.

17           I also wanted to call attention to an issue that

18  I think CARB is not looking at which is the 2050 context.

19  And so when -- we very often we're so concentrated on

20  short term goals, but we need to look at, you know, our

21  Pavley goals for 2050 which calls for rather dramatic

22  reductions in greenhouse gases.  And those goals can only

23  be met by renewable energy.  If you look at other

24  technologies, they don't get us there.  They call for

25  about a 90 percent per capita reduction.

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 1           The renewable energy needs to be looked at in the

 2  context of efficiency.  And if you do that, you find that,

 3  for example, hydrogen fuel cell vehicles require about

 4  twice as much renewable energy production, which means in

 5  most cases twice as much land area for its production.  In

 6  addition, because it's got twice the last area, it has at

 7  least twice the cost.  But if you factor in the estimates

 8  from people like the National Renewable Energy Lab, it

 9  looks more like three times the cost.

10           So my purpose is to ask why are we going to use

11  up so much extra land, you know, hundreds of square miles

12  and why are we going to make Californians pay more?  And

13  all for a tilt towards something that could be better

14  served by getting battery electric technology.  Something

15  that I drive today.

16           And by the way, I've heard many people disparage

17  battery electric for cost reasons.  I expect based on my

18  RAV 4 EV purchase to actually have a total of ownership

19  that's less than if I had purchased a gasoline vehicle.

20  And the analysis I do based on battery costs I've seen

21  suggest that is the case for future purchases.  So I would

22  like to not see CARB staff disparage battery electric

23  vehicles based on cost.

24           CHAIRPERSON NICHOLS:  Thank you.  We did get your

25  written testimony.  I saw it last night.

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 1           Mr. Geller, and then we're going to take a

 2  ten-minute break.

 3           MR. GELLER:  Chair Nichols, members of the Board,

 4  I'm Mark Geller representing the San Francisco Electric

 5  Vehicle Association.  We're obviously extremely supportive

 6  of the zero emission vehicle program.  However, it appears

 7  to us that structural preferences and conflicts of

 8  interest within the ARB are preventing the achievement of

 9  our mutual goals of putting ZEVs on the road.

10           As I mentioned tirelessly every time I appear

11  before this Board, I drove here today from San Francisco

12  directly in an electric car charged with solar power.  It

13  has 60,000 miles on it, and it works great.  And I thank

14  you.

15           But the haunting trajectory of greenhouse gas

16  emissions and the current impact of petroleum addiction on

17  our pocketbooks and politics demands ZEVs for others

18  clamoring for choice.  The courageous and forward-looking

19  actions of this Board in the past have already proven that

20  beginning the process of making ZEVs available to regular

21  consumers is possible.  In order to get back on track,

22  CARB must not only maintain the phase three numbers, it

23  must stop treating ZEV technologies in an unequal manner.

24  To see this structural preference, one need look no

25  further than the ARB home page where hydrogen and fuel

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 1  cells, not generically ZEVs, receive prominent placement

 2  with no equivalent recognition of battery electrics.

 3           The same members of staff that administered the

 4  ZEV program made recommendations to this Board are charged

 5  with promoting and administering the hydrogen highway and

 6  fuel cell projects.  A bias towards one technology is

 7  reflected in the titles and job descriptions of many

 8  staffers who wrote the recommendations you're considering

 9  today and give a fuel cell vehicle more credit that a

10  battery electric vehicle with the same rage.

11           We all hope that hydrogen fuel cell vehicles have

12  been able to achieve rapid and economic deployment.

13  Everyone interested in electric drive and its

14  environmental benefits maintains a strong interest in the

15  seductive promise of hydrogen and fuel cells.  However, we

16  cannot be blind to the actual pace of advancement of this

17  technology.  And we must not prevent a proven and more

18  affordable technology, battery electric vehicles, of

19  making the positive near-term benefit the Board desires.

20           There is no logic to a credit preference for the

21  technologies that will not put ZEVs on the road in the

22  year term.  The Board's decision should be based on a

23  performance standards, an environmental benefit standard.

24  When Alan Lloyd was Chair, he perceived a bias towards

25  BEVs.  The auto makers favored a move toward hydrogen and

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 1  fuel cell vehicles, and he said, "Is our job to clean the

 2  air or is it to force a type of technology on the road,"

 3  meaning BEVs.  As the Chair of CARB, and then the recently

 4  named director of the Fuel Cell Partnership, an apparent

 5  conflict of interest in itself, the move away from BEVs

 6  perhaps seemed logical.

 7           But now the tables have turned.  Auto makers are

 8  now saying they can't make thousands of fuel cell

 9  vehicles.  At a million dollars a pop, it's not

10  surprising.  But the battery electric cars put on the road

11  that weren't shredded continue to performed well.  Battery

12  electrics have proven themselves over time and over

13  millions of miles in regular consumer's hands, like me.

14  This Board has the opportunity to lead once again.  When

15  the California government leads, California citizens

16  respond.

17           The San Francisco Electric Vehicle Association

18  calls upon the Board to reject the staff recommendation to

19  lower by 90 percent the number of ZEVs, to hold onto the

20  25,000 number, to demand parity for various ZEV

21  technologies, and to have a separate category of 75,000

22  plug-in hybrid vehicles.  Thank you.

23           CHAIRPERSON NICHOLS:  Thank you, Mr. Giller.

24           We will now take a ten-minute break.  And we'll

25  come back and hear from the next group of witnesses.

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 1           (Thereupon a recess was taken.)

 2           CHAIRPERSON NICHOLS:  We're back.  Next up we

 3  have Warren Gifford, Bill Reinert, Michael Lord, Steven

 4  Flint, James Woolsey, Adam Borelli, Matt Miyasato, Chelsea

 5  Sexton, Dave Underwood, and Chris Paine.

 6           MR. GIFFORD:  Hi.  I'm Dr. Warren Gifford from

 7  New Jersey.  I retired from laboratories where I spent

 8  most of my career managing technology choices like these.

 9           When I first heard of the California ZEV

10  Initiative in 1990, I was electrified.  Finally,

11  leadership --

12           CHAIRPERSON NICHOLS:  Somebody was.

13           MR. GIFFORD:  You were heroes.

14           When I heard the current proposals, I was

15  appalled.  First, they're too little, too late.  Other

16  countries are racing ahead with more aggressive programs.

17  The EU has already set aggressive standards.  Congestion

18  pricing in London has already cut 70,000 cars a year and

19  by the way added 123 million pounds to the budget.  Even

20  Milan, Italy has set congestion pricing.  And let's face

21  it.  The Italian passion for automobiles is even greater

22  than Californians.

23           Further, consumers are driving the marketplace

24  much faster than your proposals for smaller, more

25  efficient cars.  And four-dollar a gallon gasoline will

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 1  moved that even faster.

 2           Thus, if we proceed on your current path,

 3  California and the US will become followers in

 4  transportation.

 5           Second, we're clearly in a period of disruptive

 6  technology.  Silicon Valley has been the source of

 7  revolutions in many industries and transportation time is

 8  up.  For example, Bob Lutz last week as Vice Chairman of

 9  the General Motors and he announced that recent research

10  at Stanford allowed for an increase by a factor of ten in

11  the energy density of lithium batteries.  That's what

12  disruptive technologies are all about.  And that's the

13  kind of change that can take place.

14           My experience is when you're trying to estimate

15  which of these technologies are going to win, that's a job

16  for entrepreneurs.  It's not a job for regulators.  It

17  changes too fast for you to be able to track it and keep

18  up with it.  My guess is the technologies that are going

19  to win in the marketplace aren't even on your radar screen

20  right now.

21           There are many available approaches.  For

22  example, you could set innovative programs of direct

23  economic incentives to help buyers make more appropriate

24  choices.  If you had registration fees that were

25  proportional to pollution -- so, for example $5,000 for a

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 1  Hummer and $25 for a electric vehicle, then customers are

 2  going to make those choices.  If you provide express lanes

 3  for zero emission vehicles, provide parking fees

 4  proportionally, and provide tolls proportionally,

 5  consumers will make those choices every day.

 6           So with appropriate economic incentives in the

 7  marketplace, those decisions will happen and you don't

 8  have to worry about what decisions you're making.

 9           CHAIRPERSON NICHOLS:  Thank you.  Your three

10  minutes are up.

11           MR. GIFFORD:  Thank you.

12           CHAIRPERSON NICHOLS:  Mr. Reinert.

13           (Thereupon an overhead presentation was

14           presented as follows.)

15           MR. REINERT:  Chairperson Nichols and Board, it's

16  a pleasure to be here today.  I'm one of the old guys

17  that's been around through EV, CNG, and fuel cells.  And I

18  knew Craig Childers back when he had hair and it wasn't

19  gray.  So he's obviously been ridden pretty hard.

20           And I was involved in the planning of the

21  original Prius and the Prius we have today.

22           I just want to make some general comments and

23  perhaps provide some understanding of where we're headed.

24           Next slide.

25                            --o0o--

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 1           MR. REINERT:  I think everybody in this room is

 2  an advocate for advanced technology.  That's not a

 3  problem.  The problem is we have 16 million consumers per

 4  year in the United States who are not ready for some of

 5  the changes we're talking about.  We need to do three

 6  things.  We need to develop the technology.  We need to

 7  prepare society.  And we need to have established

 8  standardized codes and regulations that help ease these

 9  changes in the marketplace.  If we don't bring the

10  consumers along with us, we're going to have a glut of

11  vehicles and of customers.

12           Next slide.

13                            --o0o--

14           MR. REINERT:  We want to balance the reduction of

15  environmental impacts consistent with meeting the market

16  evolution and product evolution.  We need mass market

17  appeal.  And we need to do a better job on life cycle

18  assessment impact.

19           Next slide.

20                            --o0o--

21           MR. REINERT:  Accordingly, Toyota is working on a

22  wire variety of technologies.  The ones that are in play

23  today might be the plug-in hybrids and fuel cells and even

24  some discussion of electric vehicles along with much

25  cleaner gasoline cars.  It's important to get the right

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 1  technology in the right place.  And I would point out when

 2  we started off with project G21 that lead to the Prius, we

 3  didn't intend to design a hybrid.  We intended to design a

 4  car for the 21st century.  It turned out to be a hybrid.

 5  So please keep that in mind as we choose one technology

 6  over the other.

 7           Next slide.

 8                            --o0o--

 9           MR. REINERT:  We've had phenomenal growth in our

10  hybrids.  We're selling over a million dollars a year now.

11  We've reduced pollution by 35 million metric tons.  And

12  we've announced a goal late next decade to sell a million

13  hybrids a year.  More than half of these will be sold in

14  the United States.  We think this is a key to the mass

15  market of low emission vehicles.

16           Next slide.

17                            --o0o--

18           MR. REINERT:  This little pictograph shows the

19  sales increase of the Prius worldwide and shows the

20  important role of California in helping us make the Prius

21  successful.

22           Next slide.

23                            --o0o--

24           MR. REINERT:  So we've had a big argument today

25  about EVs and fuel cell vehicles and which is right and

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 1  wrong.  I urge all of you who are interested to stay over

 2  a couple nights here and attend a National Hydrogen

 3  Association program that will start next week and learn

 4  not from us or not from any particular manufacture, but

 5  the people in the industry where this is headed and how we

 6  can get there.

 7           We do have a lot of challenges with hydrogen.

 8           Next slide.

 9                            --o0o--

10           MR. REINERT:  We do need a strong program to

11  increase hydrogen infrastructure.  As Sig pointed out,

12  this has to be between states and the federal government.

13           And finally and most importantly, we need a

14  pathway to zero carbon hydrogen.  That pathway is not

15  identified and is critical to the success of hydrogen

16  programs.

17           Next slide.

18                            --o0o--

19           MR. REINERT:  The next frontier will be our

20  plug-in hybrids.  We have two in California right now

21  along with several others for demonstrator units.

22           And I'm out of time.  If I could go to the last

23  slide.

24                            --o0o--

25           MR. REINERT:  This is AB 1811, and we think this

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 1  is how you bring a program to the state.  This is the way

 2  you bring a partnership between the auto makers, between

 3  the various state governments, between the ARB, between

 4  the universities.  It doesn't just involve plug-ins but it

 5  does involve a great deal of plug-ins.  Also it provides

 6  urban infrastructure and how we might use advanced

 7  vehicles in the transportation scheme.  Thank you very

 8  much.

 9           CHAIRPERSON NICHOLS:  Thank you.

10           Mr. Lord.

11           (Thereupon an overhead presentation was

12           presented as follows.)

13           MR. LORD:  Chairman Nichols, Board members,

14  ladies and gentlemen, thank you for the opportunity to say

15  a few words at today's public hearing.  My name is Michael

16  Lord.  I'm a manager for vehicle registration and

17  certification engineering at the technical center.

18           With ARB's help, Toyota has successfully

19  commercialized an advanced technology.  And of course I

20  mean hybrid technology.

21           At Toyota, we believe that a technology must be

22  mass marketed to make a difference, and our comments today

23  are based on that fact.

24           Next slide.

25                            --o0o--

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 1           MR. LORD:  Let me focus on the main issues with

 2  the primary interest in this review.  The fuel cell

 3  requirement, recognition of blended plug-in hybrid

 4  technology, and incentivizing plug-in technology in the

 5  near term.

 6           Next slide.

 7                            --o0o--

 8           MR. LORD:  Hydrogen and fuel cell vehicles remain

 9  a priority for Toyota.  Though we see this as a key

10  technology, we generally agree with the technical review

11  panel and the staff that significant progress must be

12  still met before fuel cells are ready for the mass market.

13  These include the issues highlighted in the slide, the

14  most important being stack durability and cost.

15           Next slide.

16                            --o0o--

17           MR. LORD:  Regarding blended plug-in hybrids, we

18  support staff's proposal regarding enhanced ATPZEVs or

19  silver plus.

20           We appreciate and thank the Board for the

21  recognition of blended hybrid technology.  And we support

22  staff's proposed EAER concept and credit structure

23  including the ten mile minimum, EAR.  Actually, I'd like

24  to make a few comments on that in the next slide, please.

25                            --o0o--

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 1           MR. LORD:  You can tell I made this graphic.

 2           Range is directly -- what we're trying to say

 3  here is range is directly related to battery size.  So you

 4  could put range or battery size.  There is a balance

 5  between cost, utility charging time, and infrastructure.

 6           Next slide.

 7                            --o0o--

 8           MR. LORD:  If we add batteries to extend EV

 9  driving range, space for passengers and luggage would

10  decrease.  This reduces the functionality and adds cost,

11  hurting market ability and we believe limiting mass market

12  appeal.  We believe we need to have some flexibility in

13  finding optimum range.

14           CHAIRPERSON NICHOLS:  Mr. Lord, I've just been

15  notified the court reporter is having a hard time hearing.

16  I'm afraid the system is not working as well as it should.

17  If you could speak right into the microphone.

18           MR. LORD:  Sorry about that.

19           CHAIRPERSON NICHOLS:  I'll take that off your

20  time.

21           MR. LORD:  Thank you.

22           So we think we need to have some flexibility in

23  determining the appropriate range based on these important

24  issues.

25           And as summary -- next slide.

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 1                            --o0o--

 2           MR. LORD:  Fuel cell volumes in Phase 2 and 3 are

 3  still higher than necessary from the development

 4  perspective.  Additionally, infrastructure issues need to

 5  be addressed.  And Bill mentioned that.

 6           Plug-in hybrids, especially blended, is a concept

 7  viable for mass market.  Been many issues both

 8  technological and societal that remain unanswered.

 9           And for plug-ins, we request that you keep the

10  ten mile minimum range and ask for further incentives in

11  the earlier years.

12           Thank you very much.

13           CHAIRPERSON NICHOLS:  Thank you.  Okay.

14           Mr. Flint.

15           MR. FLINT:  Good morning.  I'm Steve Flint from

16  the New York State Department of Environmental

17  Conservation.

18           Want to thank the Board for the opportunity to

19  testify today on behalf of the Department relative to the

20  zero emission vehicle element of the low emission vehicles

21  program.

22           California has established a great deal of

23  leadership in emissions controls.  And this is of critical

24  importance to New York and many other states as we

25  progress to meet our air quality objectives.  We have

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 1  adopted a number of programs that California has

 2  introduced.  And we will continue to evaluate new programs

 3  to see if they are appropriate for our states.

 4           The Clean Air Act specifically permits states to

 5  adopt California motor vehicle emission standards.  This

 6  is a right embrace and we expect to fully continue to

 7  exercise.  And in fact we're proud to have stood side by

 8  side with the State of Vermont in their successful

 9  defense, their adoption of the Pavley standards in federal

10  court in Vermont.

11           We look forward to continuing to work with

12  California and other states in support of these critical

13  standards.

14           A key element of California's emission standards

15  is the way it continues to drive technology to cleaner

16  levels.  The continues push in the zero emission vehicle

17  area is the ultimate technology forcing which addresses

18  both the zero miles as well as deterioration of motor

19  vehicles over their lives.

20           We recognize that New York and other states

21  adoption of the program has an impact on how automobile

22  manufacturers respond and react to the changes in the

23  program here.  This is particularly true in the area of

24  ZEV and the ZEV mandate.  In the past, we have

25  acknowledged and accounted for the complex

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 1  interrelationships between State programs by exercising

 2  regulatory flexibility of New York adoption the ZEV

 3  requirements.

 4           We focus our comments today on what have become

 5  known as the traveling provisions and offer three specific

 6  recommendations for these provisions.

 7           First, limit the traveling provisions for battery

 8  electric vehicles to Type 2 and greater, excluding the

 9  Type 1 and 1.5 vehicles.

10           Second, include provisions to limit windfall

11  credits from the traveling provisions in Section 177

12  states.

13           And third, full forward the sunset of the

14  traveling provisions for Type 3 and 4 ZEVs to 2014, with

15  the understanding that this segment will need to be

16  closely monitored and the date changed if appropriate.

17           Previously, in 2003, we testified in support of

18  provision that allowed for considering of Type 3 ZEVs

19  against the ZEV requirements for all states adopting the

20  program.  These provisions are significant.  New cutting

21  edge motor vehicles technology are introduced and

22  evaluated in the marketplace.  We continue to believe

23  there are benefits to be gained from judicious and

24  introduction in monitoring of ZEV technology in this way.

25           However, while many of the ZEV technologies can

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 1  benefit from the more deliberate deployment that will

 2  occur under the traveling provisions, we don't believe the

 3  Type 1 and 1.5 ZEVs warrant this treatment.  These

 4  vehicles do not need the careful oversight of the

 5  manufacturers once deployed, nor do they need extensive

 6  further development to be ready for market.

 7           I spoke of the windfall credit.  I note that is

 8  covered in staff's 15 day notice, so I'll move on from

 9  that.

10           CHAIRPERSON NICHOLS:  And your time is up.

11           MR. FLINT:  And finally we just ask that you

12  consider pulling the fuel cell provisions sunset on

13  traveling forward.  It may require probably will require

14  additional regs down the road.  We're not looking forward

15  to more regs, but we think it's most important to get it

16  right.

17           CHAIRPERSON NICHOLS:  Mr. Woolsey, welcome.

18           MR. WOOLSEY:  Thank you, Madam Chair.  I'm here

19  today solely on my own behalf, but by way of

20  identification, I'm a venture partner in Vantage Point of

21  San Bruno, California, a firm that invests in clean

22  technology including transportation technology.  Over my

23  career, I served in the US government five times holding

24  four presidential appointments in two republican and two

25  democratic administrations, all in the field of national

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 1  security.

 2           I was particularly delighted to hear you, Madam

 3  Chairman, and Member Loveridge, address briefly the

 4  national security aspects of what is involved here today

 5  and to hear Member Sperling and Member D'Adamo talk a bit

 6  about climate change and urgency.

 7           Both with respect to traditional national

 8  security and our oil dependence, shipping between one and

 9  two billion dollars a day worth of IOUs abroad in order to

10  buy foreign oil and in terms of climate change, we have a

11  serious set of problems on our national agenda and I think

12  on the agenda of the state of California that I think

13  should at least inform and have some impact upon the

14  debate about where we are headed.

15           Now there are three aspects of the staff proposal

16  I would like to suggest the Board take a different

17  approach to.  It would be a bid glib I think to say that

18  reducing the ZEV requirements by 90 percent is going 90

19  percent of the direction toward killing the electric car

20  as this Board tried to do five years ago.  That would be a

21  bit glib, because there is in fact a requirement for

22  plug-in hybrids.

23           And the second point is that the plug-in hybrid

24  requirement, at least in my judgment, should be separated

25  from the ZEV requirement, particularly when one company

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 1  standing up here a few minutes ago said they could more

 2  than meet the ZEV requirements themselves.  And if you

 3  separate, it seems to me it's very important to have a

 4  substantial spread in credit for a 35 to 40 mile plug-in

 5  hybrid that is all electric for that range and

 6  considerably lower mileage on a single battery charge

 7  plug-in hybrids that are blended.

 8           All of these are useful in terms of emitting

 9  emissions.  But a 40-mile battery charge plug-in hybrid is

10  essentially in three quarters of the country three

11  quarters of a ZEV.  Because three quarters of the cars in

12  the country go less than 40 miles a day.  And even in

13  southern California about two-thirds of the cars go less

14  than 40 miles a day.  If you are able to operate home to

15  home, the infrastructure requirements that you have for

16  your ZEV are that, 4.97 at K-Mart yesterday an extension

17  cord.

18           All of the planning that you are doing about

19  infrastructure could in the case of plug-in hybrids with a

20  substantial all-electric mileage or in the case of zero

21  emission vehicles all-battery, all-electric vehicles be

22  reduced to that.

23           Finally, the proposals of the staff tilt very

24  heavily still towards hydrogen fuel cells and away from

25  electricity.  In my judgment, this is extremely unwise.

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 1  My co-chairman on the Committee on the present danger,

 2  former Secretary of State George Schultz, has written to

 3  the Governor yesterday and a copy to you, Madam Chairman,

 4  calling hydrogen an R&D project.  It is.  It is a useful

 5  R&D project.

 6           But in terms of immediate early impact upon the

 7  matters that both you, Madam Chairman and Member Loveridge

 8  and Member Sperling and Member D'Adamo raised, battery

 9  vehicles, plug-in hybrids, and all-electric vehicles are

10  far, far and away ahead.  And the emphasis on hydrogen in

11  my judgment -- final point.  The emphasis on hydrogen in

12  this staff report is like the 13th chime of a clock.  Not

13  only is it strange in and of itself, it calls into

14  question everything that emanates from the same source.

15           Thank you, Madam Chair.

16           CHAIRPERSON NICHOLS:  I'm treating your extra

17  time as belonging to Mr. Schultz.  Thank him for your

18  letter as well.

19           Mr. Borelli.  Mr. Miyasato.

20           (Thereupon an overhead presentation was?

21           presented as follows.)

22           DR. MIYASATO:  I'd like to thank whoever put me

23  right after James Woolsey.

24           For the record -- I hope my slides will be coming

25  up.  I'm Dr. Matt Miyasato, the Assistant Deputy Executive

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 1  Officer for the Technology Advancement Office at the South

 2  Coast AQMD.

 3           Thank you, Madam Chair and members of the Board.

 4  It's a pleasure to be here.  I'm going to speak briefly on

 5  one issue that we bring up in our written comments that

 6  were submitted to your executive officer from our

 7  executive officer.

 8           And I think I'd first like to also acknowledge

 9  the staff's work.  I think it is an important piece of

10  work they did.  Very thoughtful.  They made some very

11  useful improvements to the proposed regulation.  I think

12  you're going to hear a lot of emotion and a lot of

13  complexity today.  What I'd look to focus on is just a few

14  facts.  One the South Coast Air Basin has the worst air

15  quality in the nation as you see on this chart.  16 and a

16  half million residents are subjected to air quality that

17  are either unhealthy or very unhealthy in major parts of

18  our region.

19                            --o0o--

20           DR. MIYASATO:  That's why we are concerned about

21  the back sliding as it were from 25,000 true zero tailpipe

22  emission vehicles to an order of magnitude decrease to

23  2500.  Any reduction in zero tailpipe emission vehicles is

24  cause for concern.  So we would support the Member

25  D'Adamo's motion for a larger floor.  However, we do also

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 1  acknowledge the difficulties and the technical challenges

 2  with respect to bringing fuel cell vehicles and battery

 3  electric vehicles to mass market or large numbers.  So we

 4  do support the idea of enhanced ATPZEVs as a backspill.

 5           If you go to the next slide.

 6                            --o0o--

 7           DR. MIYASATO:  We are concerned about the

 8  equivalency of the credits that are used to calculate the

 9  backfill.  This is showing you it's a credit mechanism and

10  not tied directly to air quality or for that matter

11  greenhouse gas emissions or energy displacement.  And so

12  the currency in which you're dealing with in terms of this

13  technology credit is cause for great consternation from

14  AQMD staff.

15                            --o0o--

16           DR. MIYASATO:  We bring this up as comparison.

17  Alone in 2007, california hybrid sales was 75,000

18  vehicles.

19           If you go to the next slide.

20                            --o0o--

21           DR. MIYASATO:  In five years, the staff is

22  suggesting -- if you click it one more time -- that hybrid

23  sales could be lower at 65,000.  And then one more click

24  will show you this is the enhanced ATPZEVs.  One more

25  click will show you the arrow bar.  It could change.  It

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 1  could be lower or higher than that.  And in comparison to

 2  the California hybrid sales for one year, we think this is

 3  too low.

 4           Next slide.

 5                            --o0o--

 6           DR. MIYASATO:  We think it's too low because they

 7  are using the existing architecture to produce blended

 8  plug-in hybrids.  Two companies already do that.  There

 9  are several others.  This agency in tandem with AQMD are

10  testing these types of vehicles.  It shows that major OEMs

11  are testing it.  And furthermore, in the medium duty

12  scale, there are OEMs that are working on plug-in hybrids.

13           So with that, if you go to the next slide, I'll

14  simple summarize.

15                            --o0o--

16           DR. MIYASATO:  We believe the number for enhanced

17  ATPZEVs or backfill are too low and we recommend that you

18  increase that number.  Thank you.

19           CHAIRPERSON NICHOLS:  Thank you.

20           Chelsea Sexton.

21           MS. SEXTON:  Thank you.  Chelsea Sexton, Plug In

22  America.

23           Like many of you and many of the other people in

24  this room, I've been working in this industry for quite a

25  while, before I was old enough to vote.  And I am as I

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 1  hope you are very, very frustrated with the fact that 18

 2  years into this particular piece of policy we have yet to

 3  have a single zero emission vehicle available in show

 4  rooms.  Certainly reducing the phase three 90 percent is

 5  not going to get us any further toward that goal.

 6           Worse, requiring an average of 140 vehicles per

 7  auto maker per year ensures these vehicles permanently

 8  allude commercial viability by remaining too expensive for

 9  mainstream adoption.  We need tens of thousands of zero

10  emission of vehicles and hundreds of thousands to even

11  begin to address the environmental and energy security

12  issues we face.  And we ask you to hold firms in these

13  requirements.

14           The reality is these cars will come.  Consumers

15  are demanding it and nearly every major auto major has

16  announced concept or production plug-in vehicles,

17  including several pure electric cars.  Their combined

18  announcements amount to several times as many vehicles as

19  CARB itself is requiring.  By requiring so few cars, CARB

20  is blocking progress, not driving it.

21           This has led to the question posed mostly by

22  reporters in 148 new articles since yesterday to ask the

23  question how relevant is CARB's decision in making zero

24  emission vehicles available?  Unfortunately, the only

25  answer I've been able the give is, "I don't know yet.  Ask

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 1  me Thursday.  I hope so."

 2           CARB's biggest opportunity may be in effecting

 3  the timing of vehicle availability in making a variety of

 4  the products available sooner than later so that the

 5  market can take over as it should.  Choice for consumers

 6  means cleaner air for everyone.  We must prioritize

 7  near-term technologies instead of the longest term one.

 8  Vehicles must be credited on the basis of air quality

 9  benefits they provide, not their cost or any other

10  arbitrary value.  CARB must adopt a stance of technology

11  neutrality and give electric vehicles and fuel cells equal

12  credit in the gold category.

13           Additionally, the requirements for zero emission

14  vehicles and enhanced ATPZEVs must be disconnected.  Both

15  of part of the solution, but we can't create an either/or

16  scenario.  We know from experience with electric cars and

17  hydrogen it just doesn't further the cause.

18           Additionally, we must focus on quality in

19  addition to quantity.  We recommend changing the PHEV

20  metric from miles to kilowatt hours in order to level the

21  playing field between small vehicles and large ones and

22  encourage maximum electrification of vehicles resulting in

23  the greatest petroleum reduction in air quality benefits.

24  We recommend making not only credit balances transparent,

25  but all of the transactions between auto makers to avoid

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 1  gaming the system or allowing auto makers to invisibly

 2  encourage the deployment of inferior vehicles.

 3           Finally, we support the reduction of the battery

 4  warranty for plug-in hybrids through phase three to seven

 5  years to strike a balance between emissions protection and

 6  getting cars on the road sooner than later.  The Board's

 7  decision today has even bigger implications.  CARB has a

 8  number of even more ambition policies it's trying to

 9  implement, among them AB 32.

10           Continuing to give in on the ZEV program will

11  result in not only not having the hundreds of thousands of

12  zero emission vehicles required to achieve those CO2

13  reduction goals, but it furthers the precedent of

14  non-enforcement and make it more difficult to be taken

15  seriously by industry as you try to implement your bolder

16  policies.

17           CHAIRPERSON NICHOLS:  Your time is up.

18           MS. SEXTON:  Thank you.

19           CHAIRPERSON NICHOLS:  Dave Underwood.

20           MR. UNDERWOOD:  Good morning, Chairman Nichols

21  and members of the Board.  My name is Dave Underwood.  I'm

22  the strategic account director for Plug Power.  And I'm

23  testifying as part of the Board's deliberations on the

24  rulemaking to consider amendments to the fuel cell

25  component for the ZEV regulation.

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 1           Plug Power is the leader in the development of

 2  energy systems utilizing fuel cells for stationary power

 3  applications, emergency backup power, and material

 4  handling lift trucks.  Plug Power has long espoused the

 5  values of sustainability and is commercializing fuel cell

 6  systems that contribute to our country's energy

 7  independence.  And in fact, we have over 700 stationary

 8  backup power systems deployed worldwide as of today.

 9           We wanted to point out to you that there is

10  another way to achieve critical mass of fuel sales in

11  addition to on-road hydrogen systems.  Fuel cells are

12  proving attractive to replace traditional solutions such

13  as batteries and diesel generators.  Fuel cell products

14  for extended run backup power and material handling are

15  commercially available today.  And I might add they're

16  actually being use in the greater Sacramento area as we

17  speak.  And to provide an environmental friendly way to

18  increase fuel cell volume in California and comply with

19  the pending FCC ruling on backup power requirements for

20  the telecom industry.

21           California has long taken a leadership role in

22  adopting new energy technologies and building the hydrogen

23  economy.  We come here today to suggest to the Board that

24  stationary fuel cells for emergency backup power is a

25  short-term step in building the hydrogen infrastructure

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 1  and using commercially available fuel cells across

 2  California now.  To make this point, Plug Power has

 3  learned their approximately 30,000 cell phone towers

 4  operating in California today.  A number of them have

 5  backup power provided by a diesel generator that is

 6  restricted by operational permit limits by local air

 7  quality districts.  Your Board has spoken many times in

 8  the recent past on the important priority you place on

 9  controlling diesel emissions and in promoting fuel cells.

10  The Governor himself has yet set forth goals on building

11  the hydrogen highway.

12           It is our belief that our company and others in

13  the industry can replace over 10,000 diesel generators

14  used in the state's telecom industry with clean fuel cell

15  backup power units.

16           Our request of the Board is to look to us to

17  assist to the effort in the short term, which would give

18  the auto makers and others working with us the time to

19  develop on-road fuel cells that can help meet clean air

20  and GHG goals.

21           Someone suggested the Board consider an incentive

22  program or rulemaking to prohibit local dirty backup

23  diesel generators in favor of clean power generating

24  sources, like our fuel cells.  The Board could request it

25  of the industry, and an action like this would immediately

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 1  move thousands of fuel cells into the marketplace right

 2  away.

 3           On a personal note, I will tell you I've been in

 4  the state for a last month in a variety of cities working

 5  with various carriers on field trials for fuel cells in

 6  lieu of generators and batteries because of zoning, weight

 7  constraints on rooftops, permitting issues, and pending --

 8  they're actually waiting to see what CARB is going to say

 9  with respect to the emissions of diesel because it's going

10  to impact how the carriers deploy their backup systems.

11  That combined with the FCC Katrina report that's going

12  through litigation right now is going to have a tremendous

13  impact.  And the fuel cells not only from Plug Power but

14  our other competitors in the industry, we are ready with

15  the technology.  It's proven.  It's deployed.  You have

16  200 fuel cells up in Napa Valley.  Plug Power just had one

17  on site at a PG&E site for Vallejo for the last six months

18  because a utility grid could not be brought in.  So the

19  hydrogen fuel sell was set in place.

20           CHAIRPERSON NICHOLS:  Thank you.

21           Chris Paine.

22           MR. PAINE:  Madam Chair, members of CARB, thank

23  you.  I'm Chris Paine.  I directed "Who Killed the

24  Electric Car."  And I must admit coming into this room is

25  a bit like a cast reunion.  So many people you see FROM

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 1  over the years.  And it is encouraging to think so many

 2  people have invested so much time in thinking about our

 3  future and the future of our vehicles, including the

 4  members of CARB staff and you on the Board.

 5           I've been touring with the film since we filmed

 6  here about five years ago when the electric car was killed

 7  in our estimation by the changes, the amendments to the

 8  ZEV regulation in those days.

 9           And for me as a five year EV driver at that point

10  and now a ten-year EV driver, thanks to Toyota's RAV 4 and

11  before that GM's EV, I cannot tell you what a sensational

12  experience it has been driving these cars and how sad it

13  is that over the last five years these cars haven't been

14  available to people everywhere.

15           When I tour in Europe and universities across the

16  country, everyone asks when can I get a plug-in car.  Wow,

17  isn't it great that CARB forced the car makers to make

18  these cars, even though it was a disruptive technology.

19  Even though car companies weren't in as good a position to

20  make money on them in the short term.  Even though they

21  went up petroleum interests.  California said you have to

22  make these cars.  Car companies did, and they turned out

23  to be terrific products.

24           I think California is considering what you're

25  considering to do today and rolling back the ZEV

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 1  requirements is a mistake.  It's the wrong direction.  We

 2  need to go back in the other direction.  The way that

 3  California, the way the Air Resources Board led the state

 4  in the earlier days in its production.

 5           I think hydrogen as you know from my film I have

 6  never seen convincing arguments in the years since then to

 7  make me believe hydrogen is anything but an R&D program as

 8  Mr. Woolsey said.  We already have tens of thousands of

 9  plugs all over this country, millions all over the world.

10  That's our infrastructure.  Not 60 or whatever one of the

11  car makers claim today.  That's not an infrastructure.

12  Electricity is much more efficient than turning other

13  kinds of fuels into hydrogen.

14           So I won't go on.  I know we're trying to get

15  through today.  But I urge the CARB to think about what

16  it's going to do right now.  Maybe it's not the right time

17  to vote on this.

18           My mom called me on the way to CARB today.  She

19  goes, "It sounds like CARB is almost worse than it was

20  five years ago."  And I said I don't think that's true.  I

21  really hope it's not true.  Thank you for your time.

22           CHAIRPERSON NICHOLS:  Thank you for your

23  testimony.

24           We'll hear from the next ten witnesses.  I'll

25  just call this whole group.  Jay Friedland, Peter Greer,

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 1  Ron Freund, Norman Plotkin, Ben Knight, David Modisette,

 2  Bonnie Holmes-Gen, Robert Sawyer, Daniel Emmett, and Jamie

 3  Knapp.  We'll start with Jay.

 4           MR. FRIEDLAND:  Chairman Nichols, members of the

 5  Board, I want to actually thank you.  I've met with a

 6  number of you personally, and it's been a pleasure.  I

 7  also want to take a minute to the thank the staff for

 8  their hard work.  They are in deed really trying to do

 9  something very, very complex.  And they're doing a lot of

10  work.  And we really want to thank them because they spent

11  some time listening to us.  And I think you can see some

12  of the results of that.  And I think now it really does

13  come up to you guys to make the right decision here.

14           So to help you with that, I think today's

15  testimony has really shown there are a variety of ways to

16  reach the kind of aggressive and necessary clean air and

17  AB 32 goals.  Particularly when you think about it, 25

18  percent reductions by 2020, 80 percent reductions by 2050.

19  We see the ZEV program -- today's ZEV program as a down

20  payment on those goals.

21           To that end, it's really critical to

22  accelerate -- not go backwards -- but to accelerate true

23  ZEVs and plug-in hybrids.  And when I say plug-in hybrids,

24  I'm talking about plug-in hybrids with a minimum 20 mile

25  range.  These are true plug-in hybrids.  De-couple those

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 1  from each other and get them out in volumes and phases

 2  three and phases four.  So I'll reiterate that 25,000 true

 3  ZEV number here.

 4           Ms. Nichols, we also agree that the public policy

 5  should advance all the technologies.  And in fact it seems

 6  like it will be appropriate now to start a California

 7  electric vehicle partnership and maybe even a California

 8  electric vehicle highway.  In fact, I'll donate my plug

 9  right here as the first station in that and you can go

10  ahead and sort of plug me in.  I mean, infrastructure is

11  key.

12           And I think Board Member D'Adamo's comments about

13  having the fuel companies start to sign up for this is

14  very, very important.  Because it's not just the auto

15  makers.  It really is a wide variety of constituencies

16  that all need to be part of the solution here.

17           So as we move forward, we also think that the

18  regulation has really become so complex that the gaming

19  continue to be likely.  In fact, I think we should not

20  even think of this as gaming but that the OEMs are trying

21  to find the minimum path to compliance.

22           A great example of that is the Nissan Ultima

23  hybrid.  I drove one.  I didn't drive an electric car.  It

24  was too far today.  So I drove a Nissan Ultima hybrid.

25  It's only available in CARB states.  And you have to ask,

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 1  well, that's a success in the sense that it's available in

 2  those CARB states.  But why isn't it available everywhere?

 3  So the regulations actually work.

 4           And we have a clear insight into the ways the

 5  auto makers might try to game the system.  Possibilities

 6  include using the banked credits they have achieved

 7  against either gold or the new silver plus enhanced

 8  ATPZEVs requirements.  Skewing the credit amounts for

 9  particular vehicles, buying credits from other

10  manufacturers, and abusing any of the carry forward or

11  Travel provisions.  And just by asking for low numbers in

12  the first place.

13           In fact, so I have to do this because I always do

14  something like this.  If you take that -- we've been

15  talking about arbitrary numbers.  We talked about 25,000.

16  But really if you take 25,000, which is what we're talking

17  about in phase three, divide by three equals -- it's 8,333

18  a year.  If you then divide that by the six major

19  manufacturers, you get 1388 cars per manufacturer.  If you

20  then divide that by three, which is what we estimate the

21  travel provision probably throws in from a simple thing,

22  that 462.96 cars.  I'll take the 96.  But these --

23           CHAIRPERSON NICHOLS:  Mr. Friedland, you have

24  used up your time.

25           MR. FRIEDLAND:  It's less than 500 cars a year.

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 1  In that sense, what we think -- you know, Tesla could meet

 2  that.

 3           The simple argument here is those numbers need to

 4  start really, really big.  So it's 25,000 ZEVs and

 5  hundreds of thousands of plug-in hybrids.  We really

 6  encourage.  Thank you very much.

 7           CHAIRPERSON NICHOLS:  All right.

 8           Peter Greer.

 9           MR. GREER:  Yes.  Chairman Nichols and members of

10  the Board, I'm grateful that you allow me to address you.

11           As a former educator for 40 years, as a father of

12  two children, grandfather of five children, two boys,

13  three girls, like you, I worry about the environment.  I

14  worry about the polluted air, the vanishing resources.  I

15  picked up a bad case of asthma living in New Jersey.

16           My point is that children are extremely observant

17  and shrewd.  And they look at our example.  And I fear

18  that we failed them.  We're teaching them perhaps that

19  there's no difference between wishing and willing

20  something good to happen in terms of the use of less oil

21  improving the environment.

22           When I told our son, Tucker, I was going to fly

23  in Washington, DC, to here to address the Board, he was

24  excited and said I studied alternative energy in the sixth

25  grade.  And I thought that was 1979.  What has happened?

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 1  It's almost like -- I was reminded of the movie with Bill

 2  Murray, Groundhog Day, endless and fruitless repetition.

 3  But at the end, Bill Murray changes for the good and likes

 4  it.  Finds pleasure in it.  There is a rebirth.

 5           And I've been sitting here listening and there

 6  are charts going up that show 2025, and then I hear 1990,

 7  and I say what the heck is going on?  I hear code words

 8  such as we need coalitions.  It's complicated.  You know,

 9  what is going on, I wonder.  And so I think we might be

10  letting our children down.

11           As a conservative republican who served in the

12  Reagan administration, I'm outraged by the effects of

13  consumption of foreign oil.  But that's covered.

14           I'm frustrated for all our ambition and all our

15  talent my country has not had the foresight, courage, or

16  political leadership to genuinely commit to the most

17  viable alternatives to the petroleum we now consume.  The

18  best way to get them to use less oil is to give them the

19  opportunity to use less or none.

20           Now others have called for an Apollo type

21  project.  I actually drove an electric car in New Jersey

22  for just a few minutes.  And I now realize we don't need

23  an Apollo project.  We could put it on the charts showing

24  2045.

25           My wife said that I better come back with an

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 1  electric car from this whole thing or she's going to be

 2  really angry.

 3           What is desperately needed is a commitment to

 4  what your state began in the 1990s as I understand it.  So

 5  I respectfully request that you put electric vehicles back

 6  on the road by adopting the changes to the ZEV program

 7  proposed by Plug In America.

 8           Maybe we failed children in another way.  They

 9  must not believe what Glocon said to Sarcitis that if we

10  were to be invisible, we would all do bad or unproductive

11  things.  I choose to believe there are many fine and

12  determined people like yourselves and others who when

13  invisible like Lamont Cranston in the 1940s Topper -- if

14  you're as old as I am in the 1950's the TV show.

15  Currently, Harry Potter with the invisibility cloak.

16  People who are invisible will do the right thing, will not

17  go on rampages of self-indulgence or foot dragging or

18  gaming, but will do things to solve telling problems.

19  Thank you

20           CHAIRPERSON NICHOLS:  Thanks for coming out.

21           Ron Freund.

22           MR. FREUND:  Good afternoon, chairman Nichols and

23  distinguished members of the Board.

24           CHAIRPERSON NICHOLS:  We need you to speak up

25  right into the mike.

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 1           MR. FREUND:  As Chairman of the Electric Auto

 2  Association, I'm here to convey a pretty simple message.

 3  Our members have driven eight-and-a-half million miles

 4  zero emission vehicles since the 2003 mandate change.  I

 5  believe you've been misinformed about the current

 6  viability of pure ZEVs and that the CARB staff has

 7  completely erred in recommending that you become track for

 8  years to come with requirements that can in fact be met

 9  today.

10           As CARB progressively gutted the 1990 ZEV

11  targets, two percent in '98, five percent in '01, and ten

12  percent in '03, decided we should wait for fuel cell

13  research instead of proceeding with proven battery

14  electric vehicle technology.  BEVs need no research while

15  clearly fuel cells still need much.

16           Today fuel cell research is not living up to your

17  2003 dreams.  So the February 2008 staff report, the ISOR,

18  proposes further delays, reducing 2012 targets so much to

19  make the ZEV regulation irrelevant.  Please hold the

20  course.  In fact, increasing those numbers would be

21  appropriate given the state of battery electric vehicle

22  technology.

23           Your 2003 retreat was blamed on the infamous

24  lawsuit by the auto makers.  In your ISOR, CARB staff

25  writes the ZEV program was last modified in 2003 to

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 1  resolve legal challenges and better address the state of

 2  technology.  Why wait when the program's success with

 3  pre-2003 ZEV requirements was demonstrated conclusively in

 4  '96 to '03 that indeed battery electric vehicle technology

 5  could succeed if given a chance.  My own car is proof of

 6  that.

 7           Furthermore, CARB is giving undue preferential

 8  treatment to fuel cells.  It's inappropriate for you to

 9  decide which ZEV technology is best.  Very recently, GM

10  and Toyota openly stepped back from fuel cell technology

11  while Ballard Power System, the fuel cell pioneer, sold

12  its automotive fuel cell assets.  Why?  Due to the long

13  time frame to commercialization and to high cost of

14  development.  And yet CARB continues to lean towards fuel

15  cells with its zero emission program.  As a technologist,

16  I recognize this as misguided tilting.

17           Fuel cells only make it more expensive for

18  Californians to drive every mile.  Using over three times

19  the precious renewable energy that BEV 's even hydrogen

20  production goals if they were ever to be met would be

21  using.  Why should we burden the California drivers with

22  these costs, which would no doubt delay market acceptance?

23  Will technological advances make fuel cells ever more

24  competitive?  No.  The laws of thermal dynamics won't

25  allow it.

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 1           Electric vehicles are fundamentally more

 2  efficient.  Both batteries and fuel cells have finite

 3  lifetimes, yet battery technology is moving rapidly due to

 4  the heavy use of cell phones and in laptops.  While you

 5  know there is still major hurdles to overcome in the fuel

 6  cells, not the least of which is developing the

 7  infrastructure to refuel them, virtually every American

 8  today has power grid access to recharge their cell phones

 9  and maybe some day their cars.  So there is no new

10  infrastructure needed.

11           I urge you to reconsider and increase your

12  numbers.  Don't tilt toward the vagueness of the true

13  unknowns.  Thanks.

14           CHAIRPERSON NICHOLS:  Thank you.

15           Norman Plotkin.

16           MR. PLOTKIN:  Thank you, Madam Chair, honorable

17  Board members.  Norman Plotkin representing the California

18  Automotive Wholesalers Association, the Automotive

19  Aftermarket Industry Association.  Representing industries

20  that are often on the pointed end of technology forcing,

21  we note its shortcomings at times.  But whether zero

22  emission vehicles are PZEVs, we're rather agnostic in that

23  question as we support emissions reductions.  In fact, the

24  biggest thing we think you can do to reduce tailpipe

25  emissions is to support a robust independent aftermarket,

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 1  for it is we who service the fleet of vehicles.  Eighty

 2  percent of vehicles of the fleet are serviced by the

 3  aftermarket.  And as we know, well maintained vehicles

 4  lead to lower tailpipe emissions.

 5           Our opposition is based upon the expansion of the

 6  PZEV program and its extra legal super warrantee

 7  provisions.  The statutory warranty provisions at 43205 of

 8  the Health and Safety Code are unambiguous.  They direct a

 9  three year, 50,000 mile warrantee period, or 7 year,

10  70,000 mile warranty period for more expensive parts.  And

11  consequently, CARB has no legal authority to establish the

12  15 year, 150,000 mile warrantees.

13           As noted numerous times in the past by our

14  organization, there is no evidence that extended

15  warrantees lead to more durable parts, the stated reason

16  for extending these warrantees.

17           Moreover, in the initial PZEV proceeding, CARB

18  commissioned the Vand corporation which found that

19  economic impact to the automotive aftermarket industry of

20  these extended super warrantees in the billions of

21  dollars.  If PZEV is to be expanded, we believe that a new

22  economic analysis should be performed at the very least.

23  To do otherwise will do considerable harm to the

24  aftermarket industry at a time when hat aftermarket

25  industry is critical to vehicle maintenance which is

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 1  critical to emissions reductions.  It's been pointed out

 2  other states have adopted the low emission vehicle

 3  program.  I will further point out that in doing so many

 4  of them have adopted your low emission vehicle program and

 5  not adopted the extended warrantee provisions.

 6           With that said, please consider that as you

 7  expand partial zero emission vehicles a reconsideration of

 8  the super warrantee is due as well as economic impact.

 9  Thank you.

10           CHAIRPERSON NICHOLS:  Thank you.

11           Ben Knight.

12           (Thereupon an overhead presentation was

13           presented as follows.)

14           MR. KNIGHT:  Bring the slides up.

15           I'm Ben Knight with Honda.  I want to talk about

16  the importance of CARB establishing sufficient credits for

17  fuel cell vehicles so that companies like Honda that

18  believe in the technology are not discouraged from

19  continuing their evolution of the vehicles.

20           We see fuel cell vehicles as the key path to long

21  term zero emissions and energy sustainability goals.  But

22  the amendments proposed specifically to the vehicle

23  substitution and credit ratios harm the fuel cell option.

24                            --o0o--

25           MR. KNIGHT:  Our president stated our belief in

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 1  fuel cell technology prospects and recent progress.  We're

 2  taking critical steps to overcome the hurdles to realize

 3  their mass market potential.

 4                            --o0o--

 5           MR. KNIGHT:  This slide illustrates some of our

 6  extensive activities to lay a foundation for fuel cell

 7  electric vehicles and hydrogen infrastructure in

 8  California.  They include real world fleets and consumer

 9  use.

10                            --o0o--

11           MR. KNIGHT:  Advancing the performance of

12  technology is the key to progress.  We're making effective

13  progress on a number of key vehicle technology challenges.

14  For example, the efficiency is greater than anyone

15  expected at this stage and over three times conventional

16  vehicle.  The greenhouse gas emission reductions of 60

17  percent are achieved even with hydrogen made from natural

18  gas to date.  And driving range is up 70 percent in just

19  four years to 270 miles, probably over 300 miles on CARB's

20  own EDDS test.  Progress is real and verifiable.

21           We still face hurdles including fuel cell and

22  battery life.  We're using lithium ion in this vehicle.

23  And we want to improve vehicle range.

24                            --o0o--

25           MR. KNIGHT:  We have a sudden shift in the

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 1  mandates focused which changes the waiving of options,

 2  effectively removes the fuel cell option.  Current rule,

 3  vehicle substitution ratios are ten to one decreasing to

 4  five to one.  But in the latest proposed amendments 1.6

 5  to one.

 6           We are prepared to spend to get best results and

 7  balanced numbers in R&D efforts to advance the technology.

 8  It's critical to use resources effectively.

 9           Current rules, fuel cell path recognize the need

10  to reflect cost in the credit ratios.  Want to encourage

11  new or additional technology or simplify the regulation.

12  That's okay as well as the credit given is in proportion

13  to the technologies that other companies are already

14  encouraged by CARB to pursue.  Those companies should not

15  be disadvantaged.  In general, manufacturers must collect

16  the lowest cost compliance option because ultimately

17  customers have to bear the cost.

18           For stations, a focus on reliable --

19                            --o0o--

20           MR. KNIGHT:  -- accessible stations in California

21  is critical.  And I welcome any questions, especially if

22  you have any doubt about whether our fuel cell and vehicle

23  efforts are real and progressive.  This is an extremely

24  serious issue for Honda.  We've aggressively committed to

25  California's near zero and zero emission goals and efforts

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 1  solving gasoline ULEV and SU LEV, first in the world.

 2  Sold the first hybrids in California, the first two

 3  ATPZEVs, the first advanced battery EVs and HEVs and the

 4  first and only fuel cell car certified for public use and

 5  leased to consumers and fleets.  Respectfully --

 6           CHAIRPERSON NICHOLS:  Your time is up.  We

 7  appreciate your testimony.  And you've given us some

 8  extensive written comments too.  Thank you.

 9           Mr. Modisette.

10           MR. MODISETTE:  Thank you, Madam Chair, members

11  of the Board.  I'm Dave Modisette with the California

12  Electric Transportation Coalition.

13           I put together a little checklist of the issues I

14  thought just to make it easier for you to follow along

15  because these are complicated.

16           Let me first say that we support the call this

17  morning for a revisioning of the ZEV program, an overhaul

18  or a start from scratch of the ZEV program that Professor

19  Sperling and some of the other Board members mentioned.

20  But I would like to emphasize with regard to the current

21  staff proposal there are some very good and important I

22  would say necessary provisions in the current staff

23  proposal.  Let me just tick down these.

24           First of all, creation of the enhanced ATPZEV

25  category which does include the plug-in hybrids and

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 1  includes them in significant numbers.  This is the shining

 2  jewel within the staff report.  We think it's particularly

 3  important.

 4           Second, adding blended plug-in hybrids into the

 5  definition of plug-in hybrids.

 6           Third, more equal treatment of battery electric

 7  vehicles versus fuel cell vehicles.

 8           Fourth, a limit on the use of these old banked

 9  credits, mostly NEV credits, that have been built up in

10  the 1990s.

11           And lastly, simplification of the compliance

12  paths.  We would urge you to adopt these provisions in the

13  staff report today.

14           There are a couple of -- next slide.

15                            --o0o--

16           MR. KNIGHT:  A few additional recommendations

17  that we would make for additions that we think would even

18  further strengthen the proposal.

19           First of all, adding an additional category for

20  even stronger plug-in hybrids.  The top category in the

21  staff proposal right now is actually relatively easy to

22  meet.  Auto makers are already talking about and proposing

23  stronger plug-in hybrids.  We suggest that you add an

24  additional category, make the regulation more forward

25  looking to even stronger plug-in hybrids.  The way we

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 1  would define that is a plug-in hybrid that can meet a more

 2  stringent test known as the federal US 06 test on

 3  all-electric range alone.

 4           Secondly, if you are going to increase the

 5  numbers of pure ZEV vehicles as has been talked about this

 6  morning, we think you should de-couple the plug-in hybrid

 7  numbers from the ZEV numbers so we don't have a decrease

 8  in the number of plug-in hybrid numbers below what staff

 9  has proposed.

10           Third, we would suggest that you ramp down the

11  early introduction credits for plug-in hybrids in the

12  years 2012 and 2013.  Right now, they end rather abruptly

13  at the end of 2011.  And we think this will have two

14  beneficial aspects.  First of all, it will encourage auto

15  makers to make plug-in hybrids in larger volumes in these

16  years.  And secondly, we think this provides an incentive

17  to avoid blackout.  Auto makers do have a lot of banked

18  NEV credits which they could use.  And if they wanted to,

19  they could entirely avoid the production of any plug-in

20  hybrids whatsoever during the phase three time period.

21           Lastly, we are concerned about the plug-in

22  hybrids battery warrantee requirement which is ten years,

23  150,000 miles.  Remember, this is new battery technology.

24  It's lithium battery technology that we have very little

25  experience with at this time.  So we are concerned that a

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 1  battery warrantee requirement of that magnitude may

 2  actually act as an impediment to early introduction of

 3  these plug-in vehicles.

 4           We would encourage you to investigate options to

 5  share the risk of these extended battery warrantees with

 6  battery suppliers, with auto makers.  It might be a

 7  situation where money could be invested from funds in AB

 8  118 or other sources to help spread the risk of this new

 9  battery technology.

10           CHAIRPERSON NICHOLS:  Thank you very much.

11           BOARD MEMBER D'ADAMO:  I'm trying not to ask

12  questions, but I am confused and could use clarification.

13  Point number one on creation of the -- could you explain

14  what you mean about in terms of stronger PHEVs.  I'm

15  assume you're talking about range and drive cycle issues.

16           MR. MODISETTE:  The test which is proposed in the

17  staff report, it's a federal driving cycle test proposed,

18  which is used to value these vehicles and the credits they

19  get.  And it's the urban driving cycle test which is a

20  relatively mild test.  And I think there's consensus in

21  the technical community that that driving cycle test

22  really does not represent the way people drive in the real

23  world.  And there is a new test that's been adopted by the

24  federal government called the federal US 06 test, which is

25  a much more aggressive driving schedule test.  And auto

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 1  makes have proposed some plug-in hybrids that can meet the

 2  test.  Our proposal is to create an additional category

 3  that would use the more stringent test.  If you can meet

 4  the test on all-electric range alone, then we think you

 5  should get rewarded for that.  We want to encourage you

 6  that --

 7           BOARD MEMBER D'ADAMO:  What credit would you

 8  recommend and what range, assuming this more stringent

 9  drive cycle test were incorporated in the definition?

10           MR. MODISETTE:  Well, it would be a higher credit

11  level than vehicles would currently get.  You know, one of

12  the vehicles which has been proposed in this category

13  would currently get a 2.4 credit level under the current

14  lower test, the urban driving cycle test.  We think in

15  this new category that credit level might bump up to 2.7,

16  2.8, something like that.

17           BOARD MEMBER D'ADAMO:  Thank you.

18           CHAIRPERSON NICHOLS:  Thanks.  Bonnie-Holmes Gen.

19           MS. HOLMES-GEN:  Good afternoon, Chairman Nichols

20  and members of the Board.  My name is Bonnie Holmes-Gen

21  with the American Lung Association of California.  And I

22  do have a couple slides in a minute from our report.

23           The American Lung Association of California has

24  been a strong supporter of this zero emission vehicle

25  program from the beginning due to the tremendous public

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 1  health and air quality benefits.  And as we've said many

 2  times before, every zero emission vehicle on the road

 3  means less air pollution and fewer public health

 4  emergencies, including asthma attacks, hospitalizations,

 5  premature deaths, and of course reduced children who are

 6  suffering from reduced lung capacity.

 7           At the same time, we strongly believe the ZEV

 8  program has been successful as we've discussed.  At the

 9  same time, we're concerned that the requirement on auto

10  makers have continued to decrease over time and are

11  proposed to be deceased today.  As you are aware, the

12  staff proposal before you would relieve the auto makers of

13  over six billion dollars in requirements to produce zero

14  emission vehicles.

15           The American Lung Association is very concerned

16  about the zero emission vehicle program because of the

17  important public health impacts.

18           The opportunities to protect public health and

19  reduce greenhouse gases with the ZEV program are

20  tremendous.  In a study that was completed for the

21  American Lung Association by TIAX, the road to cleaner

22  air, the benefits to California and society of converting

23  existing of motor vehicles to pure zero emission vehicles

24  was estimated on a full fuel cycle basis and found that

25  ZEV technologies pay back the state in a big way.

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 1            Or -- next slide.

 2                            --o0o--

 3           MS. HOLEMS-GEN:  The existing fleet of motor

 4  vehicles is costing society about ten billion per year in

 5  health and greenhouse gas costs, including the cost of

 6  illness and death due to air pollution.  These costs are

 7  unacceptable, especially given the benefits of zero

 8  emission vehicle technologies.  The American Lung

 9  Association study found this converting to zero emission

10  vehicles would result in approximately $142 billion of

11  benefits to society, billions of benefits from reduction

12  of global warming pollution and reduction of public health

13  impacts.

14           These benefits are much greater than converting

15  the entire fleet to the lowest emitting gasoline

16  technology.  So we need to continue rapidly our progress

17  toward zero emission vehicles and keep ramping up and

18  strengthening the numbers, not reducing the numbers of

19  pure zero emission vehicles and plug-in hybrids.

20           We need to increase plug-in hybrids.  The study

21  found that by converting to zero emission vehicle

22  technology and cutting particulates from tailpipes -- next

23  slide.

24                            --o0o--

25           MS. HOLEMS-GEN:  -- that California would

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 1  annually avoid at least 300 cases of premature death, over

 2  260 cases of chronic bronchitis, over 7,000 asthma

 3  attacks, more than 18,000 cases of upper and lower

 4  respiratory symptoms.

 5           These numbers are estimates.  A more detailed

 6  analysis would need to be done to perfect these numbers,

 7  but they give us a helpful understanding of the magnitude

 8  of the problem.

 9           Next slide.

10                            --o0o--

11           MS. HOLEMS-GEN:  The America Lung Association

12  study also shows 110 million tons of greenhouse gas

13  emissions could be avoided by converting to zero emission

14  vehicle technology.

15           Based on this analysis and the tremendous

16  advances in technology we've seen in the past two years,

17  the American Lung Association believes that the Board

18  needs to expand and accelerate the zero emission vehicle

19  program.  We're urging you today to take the initiative to

20  set a bold new vision for the zero emission program.

21           And we appreciate the proposal that's put on the

22  table today by Board Member Sperling to strengthen the

23  program, to restructure the program.  But we believe we

24  need to have some strong new goals incorporated into that

25  restructuring of the program.

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 1           First of all, we need to strengthen the existing

 2  staff proposal by substantially increasing requirements

 3  for pure gold vehicles and silver plus vehicles beginning

 4  in 2012 and recapture some of that $6 billion investment

 5  by auto makers that was planned for fuel cell vehicles.

 6           CHAIRPERSON NICHOLS:  You're time is up.

 7           MS. HOLMES-GEN:  I didn't get a one-minute timer.

 8           CHAIRPERSON NICHOLS:  I have zero.  We'll let you

 9  finish.

10           MS. HOLMES-GEN:  I'm quickly run through this.

11           So when one key point we'd like to make is,

12  number one, we're urging the Board to ramp up the pure ZEV

13  component.  Get back to the ten percent pure ZEV vehicles

14  and make that a requirement by 2020.

15           Second of all, let's set a visionary new goal,

16  not just for the zero emission vehicle program, but the

17  entire motor vehicle fleet to require an increasing level

18  of integration of electric drive technology in a hundred

19  percent of the vehicles by 2020.  Why shouldn't every

20  vehicle sold in California utilize zero emission

21  technology such as the available hybrid technologies that

22  we are using today to clean the air and reduce to

23  greenhouse gases.

24           And finally, we're urging you to come back in the

25  next year when the restructuring of the ZEV program that

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 1  will include milestones to reach the goal of at least 10

 2  percent of pure ZEV vehicles, hundreds of thousands of

 3  pure ZEV vehicles on the road by 2020 and to reach the

 4  goal of 100 percent integration of electric drive

 5  technology across the vehicle fleet.  Public health

 6  demands your visionary leadership today.

 7           Thank you for your time.  I'm sorry.  I was

 8  watching this.

 9           CHAIRPERSON NICHOLS:  Of course.  Well done.

10  Thank you.  Appreciate it.

11           Robert Sawyer.

12           DR. SAWYER:  I'm Bob Sawyer, professor of energy

13  at the University of California at Berkeley.

14           Chair Nichols and Board members, I'm delighted to

15  be here to comment upon the future of the ZEV program and

16  to experience from this side of the room what the meaning

17  of a three-minute limit really

18           The California Air Resources Board zero emission

19  vehicle program when adopted in 1990 required that ten

20  percent of the light-duty vehicles sold in California have

21  zero tailpipe emissions for the lifetime of the vehicles.

22  The primary goal and benefit was to be vehicles that did

23  not suffer the problems of real world lifetime tailpipe

24  emissions that were greater than the new vehicle

25  certification values.  Zero was to mean zero.

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 1           As technology forcing, the ZEV program resulted

 2  in the introduction in California during the late 1990s of

 3  eight battery electric vehicles by major original

 4  equipment manufacturers, a major accomplishment.  About a

 5  thousand of these vehicles remain in operation in

 6  California today.  Depressingly small fraction of the

 7  anticipated ten percent.

 8           The Board's redirection of the ZEV program in

 9  2003 from battery electric vehicles to fuel cell vehicles

10  was based on an assessment of unacceptably high battery

11  owner vehicle cost, limited range, related issues in

12  battery performance and cost, and the promise of full

13  performance fuel cell vehicles.

14           In retrospect, five years later, all of these

15  assessments were in error.  Fuel prices have more than

16  doubled.  The lithium ion battery with performance and

17  potential manufacturing costs appropriate to battery

18  electric vehicles is entering production and fuel cell

19  vehicles remain decades away.

20           Most importantly, the ZEV program could be a

21  major contributor to meeting California's 2020 and 2050

22  greenhouse gas reduction commitments.  Electricity is the

23  alternative motor fuel that is truly low carbon.  It will

24  become even lower carbon in the future.  And the

25  distribution infrastructure is already in existence.

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 1  Battery and plug-in hybrid electric vehicles are existing

 2  technologies that enable decreasing our dependence on

 3  petroleum, reducing greenhouse gases, and meeting air

 4  quality standards.

 5           As you recall, as Chair, I was reluctant to

 6  include the ZEV program in the state's greenhouse gas

 7  reduction efforts.  I was concerned it would become part

 8  of the auto industry's legal challenges to AB 1493.

 9  However, with the Air Resources Board three major court

10  victories and the promise of a new global warming

11  conscious and waiver friendly administration in Washington

12  of either party, that concern is now minimal.

13           As difficulties in implementing AB 1493

14  demonstrate, California needs every tool at its disposal

15  to meet global warming and air quality goals.  I have two

16  recommendations.

17           First, direct the staff to plan the coordination

18  of AB 32 Global Warming Solutions Act; AB 1493, the low

19  emissions vehicle program; AB 118, the low carbon fuel

20  standard; and the ZEV programs to accelerate the reduction

21  of greenhouse gases.  Attainment of air quality standards,

22  a reduction of dependence upon petroleum in California and

23  to ensure that the Air Resources Board regulatory programs

24  and the light-duty vehicle sector are complimentary and

25  cost effective.

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 1           At this time, restore the ZEV program to its

 2  original goal of ten percent annual sales of zero emission

 3  vehicles to be attained by 2020 as a major contribution to

 4  meeting greenhouse gas reductions.

 5           Successful PZEV and ATPZEV programs should become

 6  part of the LEV program.  Other than a possible interim

 7  credit for plug-in hybrid electric vehicles based on the

 8  actually displacement of hydrocarbon fuels, the ZEV

 9  program should be returned to a zero means zero simple,

10  easy to understand, easy to enforce program.  Continue to

11  promote fuel cell vehicles as a promising technology if

12  combined with low carbon hydrogen technology and a

13  distribution infrastructure for meeting 2050 greenhouse

14  gas reduction goals.

15           California is the place where electric vehicles

16  can and should happen.  Our climate, our multi-vehicle

17  families, our commitment to the environment, and our

18  tradition all argue for the Air Resources Board to

19  reassume leadership.  Thank you.

20           CHAIRPERSON NICHOLS:  Thank you very much.  There

21  was a small extension of time there.  Former Board Chairs

22  get a little extra consideration.  Thank you very much.

23           Daniel Emmett

24           MR. EMMETT:  Hi.  I'm Daniel Emmett, executive

25  director of Energy Independence Now, member of the ZEV

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 1  Alliance.

 2           First of all, like to thank staff for their

 3  excellent work on this proposal, much of which we strongly

 4  support.

 5           I just have a couple of recommendations.  First

 6  off, I'd like to support -- strongly support the proposal

 7  put forward this morning by Professor Sperling and echoed

 8  by others on the Board for a bold revisioning of the ZEV

 9  program over the next year.  And we think that's a

10  critical move for the future given our goals of climate

11  change, air quality, and public health.

12           In the mean time, I'd like to address two

13  recommendations, one having to do with the numbers in

14  phase three or 2012 to 2014 time frame.  The other having

15  to do with infrastructure.

16           The staff proposal of 2500 pure ZEVs required in

17  the 2012 to 2014 time frame represents -- obviously we've

18  talked about this -- a 90 percent reduction from the

19  existing requirement.  We urge the Board to act now to

20  boldly strengthen the staff proposal, maintaining the

21  current requirement, at least until the revisioning of the

22  ZEV program is complete.  Not only are more pure ZEVs

23  possible in this time frame, they are essential to meeting

24  our collective air quality, public health, and global

25  warming goals.

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 1           In addition, the Board must send a strong and

 2  consistent regulatory signal to drive investment in ZEV

 3  technology infrastructure and supporting technologies and

 4  suppliers.  Auto makers often argue that large numbers of

 5  fuel cell vehicles are not necessary in this time frame to

 6  achieve the engineering progress required for

 7  commercialization.  EIN submits this should not be the

 8  only metric or consideration for determining the

 9  appropriate or necessary number of vehicles in this time

10  frame.

11           Equally critical to the future of

12  commercialization and viability of ZEVs, is the need the

13  adequately prepare consumers, first responders, permit

14  officials, and the general public.  In addition, larger

15  numbers of vehicles will be necessary to make ZEV

16  infrastructure commercially viable both EV fast charging

17  and hydrogen.

18           Further, on the topic of infrastructure, the ZEV

19  program does not currently include a Mechanism to ensure

20  availability of fueling infrastructure sufficient to

21  support increasing numbers of fuel cell vehicles for

22  research, development, deployment, and ultimately

23  commercialization.

24           To accomplish this, we recommend the Board should

25  establish requirements for ZEV fueling infrastructure

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 1  either under this program, the LCFS, or direct staff to

 2  revise the clean fuels outlet regulation to require

 3  availability of fuel for ZEV, whichever is fastest.

 4           The current 20,000 trigger under the clean fuels

 5  outlet program does not address the near term need to

 6  deploy infrastructure in tandem with vehicles, and

 7  incentives have proven insufficient to ensure availability

 8  to fuel for ZEVs.

 9           In closing, given the scale of the air quality

10  and climate change challenges facing California and the

11  world and given the battered history of the ZEV

12  regulation, 25,000 vehicles is an incredibly small down

13  payment on cleaner transportation future, especially given

14  the fact over two million new cars are sold in California

15  every year.  Thank you.

16           CHAIRPERSON NICHOLS:  Thank you.

17           For the people who came into the room after we

18  began this proceeding, I just want to let you know the

19  process that we're going to be using is that we're going

20  to keep on going without a major break.  We'll take

21  another ten minute break at about 1:00.  So for those of

22  you with low blood sugar or just like to eat lunch, I

23  recommend that you look at where you are on the schedule

24  maybe duck downstairs and grab a salad or sandwich or

25  something.  That's what Board members are going to be

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 1  doing as we continue forward here.  So you may see a

 2  little bit of back and forthing.  But folks will be able

 3  to listen from the back room.

 4           Okay.  Jamie Knapp.

 5           MS. KNAPP:  As luck would have it,  I am one of

 6  those low blood sugar people at this very moment.

 7           Good afternoon, Madam Chair, members of the

 8  Board.  I'm Jamie Knapp.  I coordinate the environmental

 9  coalition known as the ZEV Alliance.  Today I'm speaking

10  on behalf of one of our members, Danielle Fugere, Friends

11  of the Earth.

12           I'd like to address this issue of public

13  disclosure.  Specifically, our Public Records Act request.

14  We appreciate your and staff's efforts to work with us on

15  this to settle this issue through negotiation.  And we

16  also acknowledge the auto makers for coming to the table

17  with us in January.

18           It did take 12 months of pushing on this Public

19  Records Act request.  And I will add that was five years

20  after we first commented on the record that we thought the

21  information in the ZEV credit bank should be public.  I

22  wrote that letter.  It was on September 3rd, 2002, and I

23  had to go back in my files to find it, but we did.

24           So we appreciate that staff is proposing to make

25  certain documents available to the public, including auto

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 1  maker production data and credits earned.  We are seeking

 2  some clarification on exactly what that term credit

 3  balance means.  Under this proposal, they're provided --

 4  the credit balance is provided in 2010.  We ask that the

 5  staffer and Board define that term in the regulation and

 6  that we'd also like to see these credit balances made

 7  available in the 2009 model year along with the other data

 8  that is made available at the same time.

 9           Finally, we're mostly concerned that under the

10  current staff proposal the auto maker credit trading

11  information continues to be kept secret from the public.

12  This means that in instances where auto makers buy credits

13  to meet their compliance obligations, the public cannot

14  ascertain necessarily the basis of those credits, where

15  they came from, how they were deprived, whether they were

16  issued or accounted for accurately, or whether they're

17  real.

18           This was not our understanding when we left the

19  room that day in January.  And as we've heard this

20  morning, at least one auto manufacturer shares our

21  position that trading of credits should also be public.

22           Public accountability in credit trading is

23  necessary and important.  Absent public accountability,

24  trading systems can go badly wrong as they have in the

25  past.  And you know that we had that experience with

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 1  reclaim when the regulated community knows that the public

 2  has access to compliance data, it has an incentive to

 3  produce accurate information.  And we think that full

 4  transparency around credit trading may help discourage the

 5  auto makers from trading with low cost, low technology

 6  providers, creating unintended loopholes that we also know

 7  have happened with this program.

 8           We have on several occasions now provided some

 9  language that we thought might be helpful in defining

10  exactly the kind of information that we think needs to be

11  made public.  And we respectfully ask you again to take a

12  look at that, review it, and please incorporate into the

13  regulation.  Thank you very much.

14           CHAIRPERSON NICHOLS:  Thank you.  And we will be

15  taking that issue up as part of our consideration of the

16  final action at the end here.

17           I'm going to call the next group of ten:  Daniel

18  Davids, Reg Modlin, Rick Kasper, Stephen Ellis, Paul

19  Scott, Ze'ev Dvori, Adam Smith, Alan Weverstad, Randy

20  Reisinger.

21           Mr. Davids.

22           MR. DAVIDS:  Hi.  My name is Daniel Davids, and

23  I'd like to thank Madam Chair, Board, and staff for the

24  opportunity to testify today.

25           I'm from Seattle, Washington.  Speaking on behalf

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 1  of myself and the Seattle Electric Vehicle Association,

 2  Washington is one of the states that follows California

 3  enthusiastically.

 4           Like Mark Geller, I drive and own a RAV 4 EV that

 5  was produced for the California market.  And would like to

 6  echo Mark's sediment in thanking the Board for making that

 7  possible.  It's a great car.

 8           I would in general just say I agree with the

 9  written points submitted Chelsea Sexton on behalf of Plug

10  In America.  I think they pretty well lay out my

11  positions.

12           I do have two main points though today.  I would

13  like to first reiterate my testimony from San Diego last

14  year where I pointed out an analysis of battery and cost

15  estimates is deficient if it does not basically speak to

16  the issue of reduced maintenance and operating costs of

17  battery electric vehicles.  For my RAV 4 EV, maintenance

18  is certainly zero.  And fuel costs could equate to between

19  two and three cents per mile.

20           I agree with Bill Reinhard as he states regularly

21  when he speaks we really have to look at total life cycle

22  cost when evaluating battery electric vehicles.

23           My second point is I strongly agree with Dorene

24  D'Adamo remarks.  I think she's clearly outlined where we

25  need to go in the future.

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 1           The bottom line for me is number of vehicles on

 2  the road.  In the near term, 2500 is simply too low.  CARB

 3  should be pushing specifically the manufacturers, but

 4  Detroit specifically.  I would just observe that ten years

 5  since the introduction of the Prius the fact that no U.S.

 6  auto manufacturers has introduced a car that even comes

 7  close to matching the performance of a Prius is a scandal.

 8           So in conclusion, I agree with Andy Frank.  It's

 9  about the numbers.  We need to get more vehicles on the

10  road.  Thank you very much.

11           CHAIRPERSON NICHOLS:  Thank you.

12           Reg Modlin.

13           MR. MODLIN:  Thank you, Madam Chair.  Appreciate

14  the opportunity to be here today.  And thank you to the

15  Board and the staff for hosting us.

16           You have my comments.  So I'm going to keep this

17  very staccato if you don't mind.

18           Review the ZEV mandate have two essential drivers

19  we've learned to appreciate and respect over the course of

20  time.  One is to trend vehicles towards zero emissions.

21  The other is to encourage early deployment of zero

22  emission vehicle technologies.  Many of the aspects of

23  staff's proposal meet those objectives, but there are a

24  couple that we think fall short.

25           Intermediate volume manufacturer phase in in

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 1  looking at an extended time frame to allow intermediate

 2  manufacturers to phase into this requirement I think is

 3  one of those that holds back on where ARB really wants to

 4  be.  I think this limits the number of vehicles at a time

 5  when they can actually be encouraged.

 6           Just using the staff's figures, the large volume

 7  manufacturers put in $2.6 million of investment that's

 8  just hardware.  At the same time, intermediate size

 9  manufacturers aren't committed to do anything.

10           But I'm not doing anything more than highlighting

11  that the companies that we're talking about are huge

12  multi-international that have been involved with this

13  topic as long as we have.

14           I think it's an accurate assessment probably a

15  couple of those guys are doing a heck of a lot better than

16  we at Chrysler.

17           So my point here is that the program would gain

18  an advantage to bringing more manufacturers sooner rather

19  than later.  We ask the Board in this regard to leave

20  intermediate volume manufacturers phase in as written in

21  the current regulation.

22           Second is absence of travel provision for silver

23  credits.  When the conversation draft was first put out

24  last November, I think it was a stroke of brilliance to

25  move technology into the marketplace more rapidly than we

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 1  might otherwise do because it is expensive.  It is

 2  immature for the next phase.

 3           But when the travel provision was removed, that

 4  essentially drove the cost of the program by three times.

 5           Next slide, please.

 6                            --o0o--

 7           MR. MODLIN:  Program that was going to cost us

 8  about 2.6 billion using the staff's figures, to extend

 9  that takes up to 6.4.

10           Money matters along with the technology.  This is

11  not something that volume can drive cost down.  This is a

12  generational topic where the next generation is going to

13  cost to fix them out and generation we hope is going to be

14  much reduced in cost.

15           The reason I'm particularly anxious is the next

16  slide.

17                            --o0o--

18           MR. MODLIN:  Is that from a Chrysler view point,

19  our operating profit over the last few years have been

20  bad.  We're working diligently to improve this.  This is

21  an a cumulative profit figure for Chrysler group since

22  over 2000.  And it's not a matter of just selling cars and

23  making money.  This is a tough competitive business.  And

24  you have to fight hard to make every dime and nickel.

25  Coming up with that extra 300, 600 million or next 6

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 1  billion is hard.  That's the only point I want to make

 2  here.

 3           CHAIRPERSON NICHOLS:  Thanks, because you used up

 4  your three minutes.  Thank you for your testimony.  Those

 5  are two points that had not been addressed.  So appreciate

 6  that.

 7           Rick Kasper.

 8           MR. KASPER:  Thank you, Chair Nichols, members of

 9  the Board, and ARB staff.  My name is Rick Kasper.  I'm

10  the president and chief operating officer of Global

11  Electric Motor Cars.  I certainly appreciate the

12  opportunity today to comment on the staff's proposed

13  amendments to the zero emission vehicle program.

14           Global Electric Motor Cars, or GEM, is a Chrysler

15  company has been manufacturing and selling neighborhood

16  electric vehicles now for over ten years.  During that

17  time, we've committed to vast resources to research,

18  development, sales, and support of our electric vehicles,

19  in particular battery technology, to make them a major

20  contributor to the ZEV program.

21           With over 15,000 GEM NEVs and over 20,000 total

22  NEVs in California alone, the state has grown to represent

23  the largest concentration of battery electric vehicles in

24  the world.  Chrysler and GEM appreciate that staff has

25  recognized the positive environmental benefits of NEVs by

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 1  increasing the credit level from .15 to .30 for 2009 and

 2  subsequent model years.  However, we feel that the credit

 3  value should be increased to .625 or greater.

 4           Air quality improvement due to NEV use is

 5  significant.  Although NEVs may have limited usage

 6  relative to other ZEVs, they have the same ability to

 7  eliminate cold start emissions, which is a key

 8  environmental benefit as we know.  Using a NEV instead of

 9  a conventional vehicle can eliminate up to one-third of an

10  owner's yearly tailpipe emissions due to the reduction of

11  these cold starts.

12           NEVs are used every day, averaging

13  three-and-a-half to eight trips per day, averaging about

14  3,000 miles per year by our commercial customers, and over

15  1200 miles by our residential customers.  By comparison, a

16  P-10 plug-in hybrid used as a commuter vehicle and plugged

17  in once a day achieves ten electric miles per day or 3600

18  miles per year, 20 percent greater than the average

19  commercial NEV yet the credit for this plug-in is five

20  times higher than the 2012 to 2014 time frame.

21           In addition, 2006 through 2008 model year NEV

22  credit levels should be increased accordingly as they're

23  currently at .15.  We believe the increased credit level

24  should commence with the 2006 model year because the

25  environmental benefit of NEVs have been accruing since

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 1  that time.  NEVs ultimately should not be penalized solely

 2  because of regulatory timing.

 3           I'm proud to say that GEM has created a

 4  successful zero emission vehicle company with a serious

 5  commitment to producing legitimate marketable neighborhood

 6  electric vehicles.  Please acknowledge the environmental

 7  benefits of our high quality NEVs by maintaining the

 8  incentives and increasing the credit levels as mentioned.

 9  Thank you for your time.

10           CHAIRPERSON NICHOLS:  Thank you.  I'm a driver of

11  a GEM myself.  So I appreciate it.

12           Stephen Ellis.

13           (Thereupon an overhead presentation was

14           presented as follows.)

15           MR. ELLIS:  Madam Chair, Board and staff, my name

16  is Steve Ellis.  I'm the manager of fuel cell vehicles

17  sales and marketing at American Honda.  Been with our

18  alternative fuel vehicle effort for the last ten years.

19           My credentials include direct involvement back to

20  1997 with introducing our EV plus electric car, at least

21  to consumers, direct responsibility for our Civic natural

22  gas vehicle, our F6 fuel cell car, and now introducing our

23  F6 Clarity to retail customers.

24           Honda has been a pioneer in marketing of natural

25  gas vehicles, fuel cell vehicles for consumer use.  This

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 1  is very challenging in deed given the infrastructure

 2  challenges alone.  Of course, we are working on that, too.

 3  Many thought we might even quick this challenge and some

 4  already have.

 5           Honda proposes that near zero emission dedicated

 6  NTVs qualify as silver plus, for an interim period, for

 7  example through 2014.  NTVs provide a real path forward to

 8  zero emission vehicles.  We know firsthand as the only OEM

 9  left to face the challenges of consumer marketing of a

10  dedicated alternative vehicle using gaseous fuel and the

11  clear links with our zero emission vehicle program.

12           I kind of phrase that these drivers are

13  apprentices for fuel cell vehicles in the future.  We're

14  proving that today but taking it even further with our

15  dealership operations, sales, and service technicians.

16  They learn from us too.

17                            --o0o--

18           MR. ELLIS:  Here's our proposal for transitional

19  qualification of NTVs as silver plus through 2014 qualify

20  the direct use of natural gas as a ZEV fuel.  Electricity

21  and hydrogen today in California are predominantly made

22  from natural gas.

23           Next slide.

24                            --o0o--

25           MR. ELLIS:  This shows a comparison of the credit

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 1  values according to the latest staff proposal.  And as you

 2  can see in red, the natural gas vehicle ATPZEV credit has

 3  not been adjusted to reflect this relative value, nor

 4  proper credit given for the demonstrated significant

 5  emissions reductions.

 6           If credit values and categories get too far out

 7  of alignment with environmental value, with cost, with our

 8  own real experience, an effective ZEV pathway we may

 9  defeat ourselves as we all strive to advance our

10  collective zero emission programs and goals.

11           I mentioned Honda's experience, history, and

12  commitment to innovation for environmental technology.  We

13  have serious ideas about constructive pathways forward to

14  adjust the ZEV goals.  We take advantage of our early

15  experience and our learnings and don't want to see them

16  disregarded by the complex structure of ZEV.

17           Thank you for your attention to this important

18  matter.  And I respectfully ask for your serious

19  consideration of my recommendations.  Thank you very much.

20           CHAIRPERSON NICHOLS:  Thank you.

21           Paul Scott.

22           MR. SCOTT:  Thank you.  I am representing the

23  Electric Vehicle Association of Southern California.

24           It's been about five year since EV proponents

25  stood here and unsuccessfully pleaded with this Board to

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 1  keep the original ZEV program numbers for electric cars.

 2  So what's happened in those five years?

 3           According to the World Health Organization, tens

 4  of thousands of American have died as a result of auto

 5  related pollution in each one of those five years.  Also

 6  since 2003, the US has spent over a trillion dollars for

 7  foreign oil.  The burn rate is well over a billion dollars

 8  a day and climbing fast.  The price of gas five year ago

 9  was $1.40.  It's now 4 dollars, even though oil industry

10  has agreed that peak oil will occur within the coming

11  decade.

12           Bush's multiple entreaties to the Saudis over the

13  last three months to increase production have all been

14  denied.  In times of both record prices and record demands

15  for oil, the only possible reason is because they cannot.

16  According the Matthew Simmons and his important book,

17  "Twilight in the Desert," if the Saudis have peeked, the

18  globe has peeked.

19           We've also spent close to a trillion dollars

20  fighting a war in Iraq.  And we all know we're there

21  because of the oil under the ground.  The Chinese are

22  buying up oil contracts all over the world with the intent

23  to lock up as much of this resource as possible for their

24  own growing needs.

25           Over the past five years, the scientific evidence

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 1  of climate change has been widely accepted, and according

 2  to NASA's James Hanson we are rapidly approaching a

 3  tipping point after which we cannot stop significant

 4  climate change.  If 100 percent of the vehicles sold every

 5  year were ZEVs, it would still take over 20 years to

 6  convert the American fleet to zero emission.  The auto

 7  industry sold about 85 million cars in the US over the

 8  past five years, not one of those vehicles was zero

 9  emission.

10           Car makers say they cannot build EVs fast enough

11  to meet the goals in the current regulation.  But I'll

12  remind you that in 1941 the entire auto industry switched

13  inside of 12 months to making tanks and planes for the war

14  effort.  I submit that the problems we are facing today

15  are every bit as crucial as system.  The consequences of

16  delaying implementation of ZEVs means more Americans will

17  die from pollution.  We will move closer to the

18  devastating tipping point of climate change and more

19  billions of our dollars will go out of the country with

20  much of that money going to buy the bombs and bullets that

21  will kill our soldiers.

22           The decision you are making today is historic.

23  Whether you choose to continue down the hydrogen highway

24  on the hopes that fuel cells will solve these problems is

25  a huge gamble.  The clock is ticking, however.  And I'll

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 1  remind you that the capital you are using in this gamble

 2  is the environment, our national security, and human

 3  lives.  I ask that you please vote with this in mind.

 4  Thank you.

 5           CHAIRPERSON NICHOLS:  Thank you for your

 6  testimony.  Mr. Dvori.

 7           MR. DVORI:  Chairman Nichols, Board members, my

 8  name is Ze'ev Dvori.  I'm the President and COE of Tesla

 9  Motor.  And yes my name is true is Ze'ev.

10           Contrary to the ISOR assertions, commercially

11  viable battery powered ZEVs are manufactured today.

12  Currently Tesla has received over 1,000 orders backed by

13  deposit for the Roadster.  We are now in production.  By

14  the end of the year will be producing the Roadster at the

15  rate of 12.8 automobiles per year.

16           Consider this.  If Tesla, a young company based

17  in Silicon Valley, can produce enough pure ZEV without any

18  governmental assistance, why is then that giant auto

19  makers within infinitely more capital and engineers have

20  not done it yet?  The CARB requirement was not sprung

21  suddenly on the auto makers.  They have known them for

22  years.

23           ISOR is seriously flawed.  Among other erroneous

24  conclusions are that "No manufacturers will produce any

25  battery EV prior to 2012."  The fact clearly dispelled

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 1  that finding.  What's more, in the ISOR report, staff

 2  showed a proposed amendment will not have adverse impact

 3  on California businesses.  This statement is factually

 4  incorrect.  The staff proposal if enacted will have a

 5  severe adverse impact on Tesla, the only car maker based

 6  in California since having the ability to sell the

 7  cumulative ZEV credit.

 8           The staff recommendation to reduce the pure ZEV

 9  requirement for the years 2012 to 2013 by 90 percent and

10  exempt the most prosperous OEM the like of Mercedes, BMW,

11  and VW from making pure ZEV vehicle for 12 years

12  ostensibly because of the financial hardship and not

13  indirect contradiction to the Board's specific

14  instruction.  Specific instruction was this any change

15  should strengthen the overall objective of the program.

16  It is, in fact, quite disturbing to see the staff

17  recommendation.

18           Undoubtedly, not just California, the nation, is

19  watching your decision.  I implore you not to accept the

20  staff recommendation for reducing and delaying the ZEV

21  requirement.  In fact, you need to increase and accelerate

22  the pure ZEV requirement since there is no technical

23  barrier, only the self-serving interest of some car

24  makers.

25           At the bear minimum, I urge you to implement the

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 1  following:  To truly incentivize all car makers, do not

 2  reduce the number of pure ZEV credit earned.  For the year

 3  2009 through 2011, keep the credit earned for Type 2 the

 4  same as for 2008 at ten ZEV credits for each pure ZEV

 5  sold.  For the years 2012 through 2014, do not reduce the

 6  minimum pure ZEV requirement.  And lastly, do not allow

 7  for substitution of pure ZEV with partial ZEV.  Thank you.

 8           CHAIRPERSON NICHOLS:  Thank you.

 9           Adam Smith.

10           (Thereupon an overhead presentation was

11           presented as follows.)

12           MR. SMITH:  Good afternoon.  My name is Adam

13  Smith.  I'm speaking for Google.org.  You might be asking

14  why is Google here.  We are really want to look at how

15  information and technology can address global challenges,

16  and we've created a philanthropic arm we call .org.

17           Next slide.

18                            --o0o--

19           MR. SMITH:  One of our focuses is climate change,

20  and the first thing we looked at is transportation is the

21  second larger emitter of greenhouse gases after power

22  generation.  And then if you look at that chart, you know

23  the passenger vehicles 55 percent.  So Google wanted to

24  get together a fleet of cars for our employees to use,

25  because we have a number of employees who commute to work

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 1  using our bus system.

 2           What we did is we took some cars that are

 3  regular -- we have others that are hybrids.  And then we

 4  have conversions to have plug-in hybrids.  The goal being

 5  we want to see how these three can compete head to head.

 6  What you're seeing from our website is sort of real data

 7  from a drive that happened March 17th.  We track every

 8  ride that anyone takes, whether they speed or not and let

 9  them know.

10           So what I'd like to do is go to the next slide.

11                            --o0o--

12           MR. SMITH:  Based on our experience, listen, we

13  can get clean air in years, not decades.  We're excited

14  about plug-in hybrids.  We're excited about EVs.  And we

15  see, you know, as a technology company ourselves, we're

16  constantly trying to innovate.  There's innovation in

17  front of you.  Why aren't we using it?

18                            --o0o--

19           MR. SMITH:  Our first recommendation is the 25

20  mile minimum all-electric range.  These numbers get tricky

21  because there's so many of them.  But think about it.

22  Fifty percent of people who commute to work can go there

23  and come back in all electric if it's 25 miles.  It's

24  actually more than that.  There's manufacturers saying

25  they can do greater.  You know, ten miles is just not

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 1  interesting enough.  It makes me believe these

 2  neighborhood electric vehicles are good because ten is so

 3  small.  And the reason it's important is because you're

 4  not going to plug in your car unless you see feedback.  If

 5  you plug in your car and you notice I don't go to the gas

 6  station but once a month now.  Or, wow, I used to go every

 7  five days but now I go every seven days, it's a very

 8  different customer experience.  We've got to get that to

 9  people so they understand the value of plug-ins and

10  electrification.

11           Next slide.

12                            --o0o--

13           MR. SMITH:  The next thing -- and I think ZEV and

14  the Tesla guys have nailed this.  Tesla is not only better

15  than an OEM, it's better than all six.  They're basically

16  saying we have enough credits for every but six most

17  popular OEMs and we can sell it to them.  They're claiming

18  that's crazy.  They're in the market to have something

19  that's going to be very valuable they can make money off

20  of.  I think it's a testament to them, but really a

21  testament to how low these numbers are.  We're

22  recommending 40 percent.  But that's us trying to be

23  conservative.  Really these number are silly.

24           If you notice from this graph, what we're trying

25  to show you is the staff proposal is completely covered by

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 1  Tesla, and we want it to be at least greater than Tesla if

 2  we're using them as a benchmark.  And they're someone that

 3  didn't exist five years ago.  We're really proud of them.

 4           Next slide.

 5                            --o0o--

 6           MR. SMITH:  The travel provision has been spoken

 7  about quite a bit here.  And, you know, there's pluses and

 8  minuses.  For us, what bothers me is a state like

 9  California or any state that adopts these ZEV programs may

10  be in a situation where they're going to get zero air

11  quality improvement.  That's not fair.  I don't think

12  California should adopt a program where it doesn't get

13  benefits.  I don't think Vermont is going to adopt a

14  program where they don't get benefits.  And my reasoning

15  is these cars can go anywhere.  I think if the state says

16  we want to have cleaner air, they deserve to get it.

17           Next slide.

18                            --o0o--

19

20           CHAIRPERSON NICHOLS:  You are out of time.  So

21  please finish up.

22           MR. SMITH:  Finish up right here.

23           Mild hybrids, neat technology.  They're not

24  really going to get us there.  Same with neighborhood

25  electric vehicles.  I'm really glad they're out there.

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 1  They're not ZEVs.  Thank you.

 2           CHAIRPERSON NICHOLS:  Okay.  Thank you.

 3           Al Weverstad.

 4           MR. WEVERSTAD:  Good afternoon.  My name is Al

 5  Weverstad.  I'm with General Motors.  And we have a broad

 6  array of advanced technology vehicles.  We build hybrids.

 7  We build gasoline vehicles that have improved fuel

 8  economy.  We build plug-in hybrids.  We'll have a plug-in

 9  hybrid available in 2009 model year.  We also build the

10  Chevy Volt which we call an extended range electric car.

11  And we are building fuel cell vehicles.  We call that gas

12  friendly to gas free.

13           I want to let everyone know that we have not

14  given up on fuel cells.  And in fact have delivered over

15  40 fuel cell vehicles to the state of California already.

16  We've got wonderful results from all of our drivers.

17  We've had over 1500 drivers in these vehicles already.

18  And we've had 50,000 volunteers to be part of our project

19  driveway, which says there is really a market for

20  alternative fuel vehicles out there if we can get it to

21  them affordably.

22           Our biggest threat to commercialization with

23  regard to fuel cell vehicles is the lack of 700 bar

24  infrastructure.  We see that as our largest impediment,

25  and we implore you to help and to create incentives for

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 1  the energy providers to get us that kind of fuel.

 2           But the real reason I'm here today is to talk

 3  about a suggested improvement to your program that you all

 4  have worked so hard on.  And that involves the extended

 5  range electric vehicle or what we like to call practical

 6  ZEV.  It's our Chevy Volt technology.  It does have a

 7  plug-in, but it's really an electric car with a range

 8  extender.  It can drive the US '06 schedule all electric.

 9  It can drive 40 miles all electric.  And so we're asking

10  that we take advantage of that -- create a different

11  category, a type G, or change type F to allow for some

12  additional credits for that.

13           The vehicle has zero tailpipe emissions for 40

14  miles.  We've studied over 600 drivers in southern

15  California.  Sixty-four percent of those drivers would

16  leave home all electric and arrive back home all electric.

17  Those vehicles, if they would plug in one time, that

18  number would increase to 84 percent would be all electric

19  all the time.

20           We' even went to the trouble of putting a

21  pressurized fuel system on board so there won't be any

22  evaporative emissions, because we're not sure how often we

23  would purge that vehicle.  It also is our e-flex which

24  means it has capability of having a fuel cell as the

25  charging entity if or when hydrogen becomes available.

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 1           So what we would ask is that you give us some

 2  additional credits and you also give us a phase out of the

 3  multiplier.  We understand at 2014 it needs to be one.  It

 4  is three in 2011.  We'd like to see a phase out of that.

 5           CHAIRPERSON NICHOLS:  Your time is up, if you

 6  could just finish.

 7           MR. WEVERSTAD:  We also are in agreement that

 8  kilowatt hours is the most appropriate measurement.

 9           CHAIRPERSON NICHOLS:  Okay.  Thank you.

10           Randy Reisinger.

11           MR. REISINGER:  Chairman Nichols, Board.  I'm

12  speaking today on behalf of Felix Cramer of Cal Cars who

13  was unable to be here today as he's receiving an award.

14  He'll submit additional commentary shortly.

15           The Board has an opportunity today to lead the

16  transition from petroleum to fuels that are based on

17  electricity and to propel our transportation vehicles in

18  this new manner.

19           The vehicles propelled by petroleum were burning

20  in internal combustion engines that average about 20 miles

21  per gallon or roughly 10 to 12 percent efficient and

22  account for significant emissions of greenhouse gas air

23  pollution.  If most drivers knew that 90 percent of the

24  gas they purchase is wasted as heat and air pollution and

25  only ten percent moves the vehicle forward, I'm sure they

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 1  would look for a more efficient alternative.

 2           Electric vehicles on the other hand can be up to

 3  80 percent efficient and emission free.  And the cost of

 4  electricity is significantly less than one dollar per

 5  gallon equivalent.  So this transition from fossil fuels

 6  to electricity has recently been accelerated by Toyota's

 7  Prius, hugely popular hybrid vehicle, that primarily uses

 8  electricity to propel the car but uses petroleum to

 9  generate that supply of electricity.  This interim

10  approach has developed fuel saving from 20 miles per

11  gallon to 40 miles per gallon, doubling the mileage.

12           Cal Cars has extended this transition by creating

13  and demonstrating and promoting the plug-in hybrid

14  electric vehicle by converting the Prius into the PH EV.

15  By adding battery capacity electronics, the owner now has

16  the opportunity to use electricity from the grid as a part

17  of the fuel that's used.

18           Yet, this is just the beginning.  Vehicles have

19  the opportunity to go from 100 miles per gallon that's

20  being achieved with the plug-in Prius up to 100 miles per

21  gallon plus.  These are real solutions that should not be

22  overlooked.

23           The PH EV represents a significant step in this

24  process to get toward pure ZEVs.  The Board's historical

25  response has been to set standards for California's air

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 1  quality by regulating criteria pollutant emissions.  The

 2  game has changed with the passage of AB 32.  AB 32 directs

 3  the ARB to address climate change through greenhouse gas

 4  emission regulations.  EVs and PH EVs have the potential

 5  to significantly reduce our CO2 emission footprint from

 6  the transportation sector which is currently responsible

 7  for 42 percent of California's emissions.

 8           EVs and PH EVs have the additional benefit of

 9  reducing the trade deficit.  Today, the US is accumulating

10  a trade deficit of two billion dollars a day, half of

11  which is used for the purchase of oil often from countries

12  or governments that favor the demise of the US and the

13  death of our citizens as mentioned earlier.

14           CHAIRPERSON NICHOLS:  Your time is up.

15           MR. REISINGER:  Okay.  I'll finish.

16           We therefore support a level playing field and

17  require full 25,000 ZEVs as does the Plug In America

18  position.

19           CHAIRPERSON NICHOLS:  Thank you.

20           Mr. Yasuoka, and then we're going to take a break

21  for the court reporter.  We'll try to make it ten minutes.

22           MR. YASUOKA:  Good afternoon, Chairman Nichols

23  and Board.  My name is Aki Yasouka from Honda.

24           All of you guys know me very well.  I always

25  speaking away from the legal side, away from the political

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 1  side, purely engineering side.

 2           I have very same feeling as the former Chairman

 3  Dr. Sawyer testified here because now in 1990 the ZEV

 4  regulation was set.  It was zero.  And based on that, we

 5  are changing many things.  And then we have to realize now

 6  the social priority is not only the smoke forming gases,

 7  greenhouse gas, and also the national security is a

 8  concern.

 9           If we promote some technology forcing, three

10  factor has to be integrated and to arrange that.  Now we

11  are looking at -- I'm looking at the discussion battery

12  EV, fuel cell, and plug-in hybrid.  Those three supporters

13  come.  But if we tried and then we found that the five

14  years ago that driving range and the refueling time --

15  that means to go the amount of 400 miles I think we have

16  to fueling time -- are very difficult.

17           I think once the customer getting used to the

18  current convenient gasoline car I think will revolt and

19  switch to the fuel cell vehicle.  And Ben testified.  And

20  I think that of course great difficulty to technical

21  discussion there and somebody doubting.  It's true.

22           But now next one is coming, plug-in hybrid.

23  Plug-in hybrid try to solve that charge time and the

24  driving distance.  Driving range problem.  So some kind of

25  compromise.  But also we have to scientifically evaluate

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 1  all three technologies and with current electricity grid

 2  and future how much electricity is going to be clean up.

 3           And currently the staff proposal don't allow the

 4  travel for the plug-in hybrid, that means that

 5  Massachusetts or some -- those states -- other states will

 6  adopt this and we have to place there.  But in those

 7  states, their greenhouse gas is going to be increased, not

 8  decreased.  Of course some years later it will happen.

 9  But I think we have to carefully adjust the timing.

10           CHAIRPERSON NICHOLS:  Thank you.  Your time is

11  finished

12           MR. YASUOKA:  I conclude.

13           To make these three technologies positive but to

14  acquiring the quantity is I think we have to be careful

15  watching.

16           CHAIRPERSON NICHOLS:  Thank you.  We will

17  reconvene at ten past 1:00.  Thanks, everybody.

18           (Thereupon a recess was taken.)

19           CHAIRPERSON NICHOLS:  I'm going to call the names

20  of the next ten witnesses, and we'll continue along the

21  path that's been working well until now.

22           The next group is Ted Flittner, Joy Turock, Jay

23  Smith, Spencer Quong, Luke Tonachel, John Shears, Francois

24  Choquette, David Turock, and Stuart Johnson.

25           MR. FLITTNER:  Good afternoon.  I'm Ted Flittner.

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 1  I'm a Californian, also a founder of 1 Amp World, which

 2  has a charter of improving our world climate through the

 3  proliferation and commercialization of plug-in vehicles.

 4           I'd like to talk today about the ZEV requirement,

 5  the numbers for vehicles.  And I'd like to first allude to

 6  one of the statements earlier by Dr. Sperling this morning

 7  said almost anyone in industry agrees that electric drive

 8  is the future.  I totally agree with that.  I'll take that

 9  a little further and it seems that almost everybody in

10  industry agrees that plug-in electric drive is the future.

11           What you see up on the screen is just a few

12  examples of that.  I want to give a little more

13  illustration to what has been in demonstration and concept

14  vehicles to really illustrate that point even further.

15           Today, actually producing cars, we have two

16  battery electric cars that are being produced, Tesla and

17  Think.  We had a couple people speak on behalf of Tesla

18  this morning.  We had an announcement this morning from

19  Nissan.  They have three battery electric vehicles that

20  they have formerly announced in 2010, 11, and 12.

21  Mitsubishi has formally announced a battery electric

22  vehicle for 2009.  Subaru, battery electric.  Mercedes and

23  Tesla have spoken of a serious plug-in hybrid.  That was

24  2010.  General Motors of course you've seen the GM Volt

25  2009 or 2010.  Volkswagen, a battery electric fuel cell

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 1  combo.  BYD of China, one of the largest auto makers in

 2  China, plug-in hybrid electric vehicle 2009.  These are

 3  formal announcements.

 4           In addition to that, we have quite a few

 5  development actual cars in demonstration that are on the

 6  streets that includes Saab and Volvo partnership, the Ford

 7  plug-in hybrid Escape.  Some of those are on the roads in

 8  California as demonstration vehicles.  Toyota with their

 9  plug-in Prius in demonstration in California and in Japan.

10  We've got concept vehicles from many auto makers including

11  Audi with the plug-in hybrid.  We have Volvo with the

12  Recharge.  We have Chrysler who have announced one battery

13  electric concept car and two plug-in hybrids.  BMW with

14  their 3 series car.  Nissan with another plug-in concept.

15  And start-ups, we have many start-ups.  And I think

16  there's over 20 battery electric and plug-in hybrids

17  concept vehicles from start-up companies.

18           There's more than just a few things out there.

19  There's more than just a possible indication that that's

20  where industry is going.  Industry has announced it.  And

21  many of the companies I just mentioned are not among the

22  six that we're focusing on with the ISOR and the ZEV

23  program here.

24           This illustrates that industry in mass has

25  recognized that this is the future.  This is where we're

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 1  going.  And with that I believe that the numbers need to

 2  be raised.  We need to get back to the base numbers, as

 3  Ms. D'Adamo mentioned earlier.  We need to get back to the

 4  base numbers and in fact raise those numbers.  I really

 5  would recommend that we look at those numbers and we raise

 6  those numbers for both BEVs and plug-in hybrids.

 7           CHAIRPERSON NICHOLS:  Thank you.  Your time is

 8  up.

 9           BOARD MEMBER D'ADAMO:  A question and I don't

10  know that the witness would have an answer, but maybe

11  staff could work on this.  You raise a good point and

12  there have been many auto makers that have actually made

13  announcements, and I've picked up on it occasionally in

14  the press and have met with some of them individually.

15  But I don't feel I have a very good handle on the specific

16  announcements.  And perhaps if you have that information

17  or hopefully staff would they could plug it in within the

18  time frame.  Because that's the other challenge when the

19  announcements come out, sometimes it's not necessarily in

20  line with the time frame for phase three and four.  Maybe

21  if you have that information, you can get back to that.

22           EXECUTIVE OFFICER GOLDSTENE:  We'd be happy to

23  get back with that.

24           CHAIRPERSON NICHOLS:  A quick overview with where

25  we are with the announcements that have come down since

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 1  the announcements have come down.

 2           BOARD MEMBER RIORDAN:  That might cause us to be

 3  more optimistic too.

 4           EXECUTIVE OFFICER GOLDSTENE:  It may.

 5           MR. FLITTNER:  I would be happy to meet with any

 6  of the staff people to talk about this in more detail.

 7           CHAIRPERSON NICHOLS:  Thank you.

 8           Joy Turock.

 9           MS. TUROCK:  I'm Joy Turock, a high school

10  student from New Jersey.  For some of you, I'm young

11  enough to be your granddaughter.  And as I prepare to go

12  to college this fall, I worry about the world my

13  generation will inherit.  I've had pollution induced

14  asthma since I was eleven.  Although I take daily medicine

15  for it, damage is still done to my lungs.

16           I wonder about how the world will be many years

17  from now if action is not taken to change the direction in

18  which the environment is currently headed.  When I am a

19  grandmother, will I have clean air to breath?  Will I be

20  able to have healthy children and grandchildren, or will

21  be bringing them into a pollution filled, oil dependant

22  world?

23           The initial statement of reasons paper says

24  hydrogen or battery electric vehicles are impractical for

25  the general public.  I agree with you on hydrogen.  I know

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 1  from my high school chemistry classes that reforming

 2  natural gas energy into hydrogen is extremely inefficient.

 3  However, having driven an EV for more than two years and

 4  taken one apart, I can tell from you personal experience

 5  that they are a practical form of transportation now.

 6  They're quiet, efficient, non-polluting, powered by

 7  renewable energy that doesn't cost $100 per barrel.

 8           Revise your proposal to support electric vehicles

 9  by requiring tens of thousands of them, not hundreds.  Let

10  consumers like me choose what works best in the real

11  world.  Make a positive difference in the environment.  Be

12  responsible for the decline of pollution related disease

13  and our dependence on foreign oil and strengthen our

14  national security.  Champion Plug In America's proposal

15  and bring back the electric car.  In support of EVs now,

16  it will brighten my future as well as that of your

17  children and grandchildren.  Thank you.

18           CHAIRPERSON NICHOLS:  Thank you.

19           Jay Smith.

20           MR. SMITH:  Thank you, all.  My name is Jay

21  Smith.  And I'm 17.  And I have a message from my friends

22  and from my generation in general.

23           I think global warming is the most serious

24  challenge facing the world today, and we have to deal with

25  it really soon.  And I'm here because I drive an electric

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 1  car.  I have an old Ford Escort that I've been fixing up

 2  and driving.  I've talked to hundreds of people about it,

 3  my friends.  And I tell them all when you plug in an

 4  electric car, you're releasing one-third the CO2 of a gas

 5  car.  And it's only going to get better as more renewables

 6  are added to the grid.

 7           That's why I think this mandate, the zero

 8  emissions program, is the most important part of

 9  California's commitment to fighting global warming.

10           So I would like to see higher numbers.  I'd like

11  to see 25,000 pure ZEVs, and I'd like to see a level

12  playing field for battery electric and hydrogen.  And I'd

13  like to see 75,000 plug-in hybrids with a significant

14  all-electric range, which would be at least 20 miles.

15  Thank you, all.

16           CHAIRPERSON NICHOLS:  Thank you.  And thank you

17  for your very specific suggestions.  Appreciate your

18  coming and spending the day with us.

19           Spencer Quong.

20           MR. QUONG:  Chairperson Nichols, Board members,

21  and ARB staff, Spencer Quong.  I'm the senior vehicles

22  engineer for the Union of Concerned Scientists.

23           Before I begin the main subject of my talk, I

24  wanted to bring to your attention to a report that we have

25  submitted along with NRDC and five other organizations

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 1  which highlight nine potential loopholes in the proposed

 2  amendments.  We don't have time to discuss them here, but

 3  we ask that the Board direct staff to review the report

 4  and modify the regulations appropriately.

 5           What I'd like to focus on, however, is the

 6  importance of the ZEV program to California's long term

 7  global warming goals.  We all know that California has the

 8  goal to reduce global warming emissions by 80 percent 1990

 9  levels in 2050.  And using ARB and CEC's data from the

10  State Alternative Fuels Plan, U.C. has estimated in order

11  for California to meet its 2050 global warming targets,

12  the state must have 379,000 pure zero emission vehicles on

13  the road by 2020.

14           If you remember any numbers today, I hope it is

15  these.  In 12 years, California needs to have 379,000

16  battery electric and fuel cell vehicles on its streets and

17  highways to meets its global warming goals.  This is a

18  significant number of vehicles in a short period of time.

19  This is a significant number of battery factories and

20  hydrogen fueling stations and public chargers and fuel

21  cell manufacturers in a short period of time.

22           In the near term, if you take the staff proposal

23  and our 2020 estimate, you create an aggressive advanced

24  technology program with the growth rate similar to the

25  Pruis in 2012 to 2020.  However, if you increase the

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 1  phrase three requirement to 10,000 as proposed by Board

 2  Member D'Adamo, you start investing in technologies

 3  sooner, thereby creating a more reasonable and moderate

 4  growth rate between 2012 and 2020.

 5           All of this cannot be done with the current

 6  regulations and especially with the proposed amendments.

 7  So UCS recommends the following three changes.

 8           First, have the staff review and address the nine

 9  potential loopholes.

10           Second, overhaul the ZEV program next year and

11  place it on the road to meeting California's long term

12  environmental goals.

13           Finally, the Board must begin increasing the

14  number of gold vehicles today and place the program on a

15  realistic near-term path as suggested by Board Member

16  D'Adamo that places the technology challenges -- balances

17  the technology challenges and the fact that the ZEV

18  program is crucial in the fight against global warming.

19           To be frank, the ZEV program needs to stop taking

20  baby steps and needs to grow up and become part of our

21  fight against global warming.  What the Board does today

22  with the ZEV program will echo across the state and the

23  nation for 30 years and beyond.

24           Therefore, we ask the Board to look at the

25  scientific evidence in front of you and have the courage,

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 1  the determination, and the foresight to create a new

 2  vision for the ZEV program.  Thank you.

 3           CHAIRPERSON NICHOLS:  Excuse me, Mr. Quong.  I

 4  have this document in my packet here.  Is there something

 5  additional that you were referring to when you mentioned

 6  the specific loopholes that you were pointing out?

 7           MR. QUONG:  We submitted two documents.  One

 8  discussing the global warming and the ZEV program, and the

 9  other one discussing the nine loopholes?

10           BOARD MEMBER HILL:  Dated March 26th.

11           CHAIRPERSON NICHOLS:  I'll have to borrow a copy.

12           MR. QUONG:  Be glad to provide you one.

13           CHAIRPERSON NICHOLS:  Perhaps if you have extras.

14           BOARD MEMBER D'ADAMO:  I have a question.  Is

15  there a number that you would recommend for the ramp up in

16  order to provide for a more smooth transition between

17  phase three and four.  Right now we're at 25 for phase

18  three and 50 for phase four.

19           MR. QUONG:  Well, whatever you do, you need to

20  make sure that you're looking at the long term global

21  warming goals.  You need to ramp up not just the gold

22  vehicles but the plug-in hybrids.  You need to close the

23  loopholes.

24           The numbers that you suggested earlier today are

25  something that is feasible and provides a longer time line

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 1  to advance the technology, because these advanced vehicles

 2  do require more research.  But it also balances the need

 3  to get these vehicles on the road sooner.

 4           CHAIRPERSON NICHOLS:  Okay.  Thank you.

 5           Luke Tonachel.

 6           (Thereupon an overhead presentation was

 7           presented as follows.)

 8           MR. TONACHEL:  Good afternoon, Chairman Nichols

 9  and members of the Board.  My name is Luke Tonachel, a

10  vehicles analyst with the Natural Resources Defense

11  Council.

12           I'm pleased to be before you today to talk about

13  a specific proposal to strengthen the plug-in hybrid or

14  silver plus or enhanced ATPZEV portion of the ZEV program.

15  And the slide that's up right now gives a comparison of

16  the staff proposal versus what we are proposing for the

17  plug-in volume requirements.

18           The top row you can see it's about 25,000

19  vehicles a year from 2012 to 2014 and then goes to about

20  28,000 per year from 2015 to 2017.  So you can see the

21  requirement is basically flat.  It's like a car stuck in

22  second gear and can't get to its full potential.

23           My request for the Board is basically that you

24  lock in a commitment from the auto makers to actually

25  produce large volumes of plug-in hybrids, commercialize

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 1  them, and then put California on a path to meet its air

 2  quality and greenhouse gas reduction goals.  My proposal

 3  shown in the second row does just that.  It starts at

 4  25,000 and then ramps up at 40 percent per year.  Our

 5  proposal would produce one-and-a-half more times in phase

 6  three and two-and-a-half times more in the same six year

 7  period.

 8           Our proposal is just an initial step.  Even at

 9  the volumes we propose, there is still a large gap between

10  these volumes and the trajectory that we need to be on to

11  in order to meet our 2050 greenhouse gas reduction goals.

12  This gap is clear when you consider a moderate case

13  scenario from the AB 1007 state alternative fuels plan --

14  this is mentioned in the note on the slide -- adopted by

15  the Board which calls for 1.3 million plug-in hybrids on

16  California's roads by 2020.

17           Next slide, please.

18                            --o0o--

19           MR. TONACHEL:  This slide just shows another

20  example of how the staff proposal I don't think goes far

21  enough.  The flat lines at the bottom are examples of the

22  volumes that would be required from the staff proposal for

23  a 40 mile and 20 mile plug-in hybrid versus the Toyota

24  Prius from 2000 to 2005 is the sales of the Toyota Prius.

25  You can see the sales rate just does not keep up, and

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 1  there's no real increasing ramp for plug-in hybrid

 2  vehicles.

 3           The Prius ramp up is 74 percent per year.  My

 4  proposal is for 40 percent per year.

 5           Next slide.

 6                            --o0o--

 7           MR. TONACHEL:  This is a repeat of the table.

 8  And again, my proposal here is to lock in a commitment

 9  from the auto makers to get more plug-in hybrids on the

10  road and in the volume shown in this table.

11           I've actually suggested some language, and I

12  started with a May 2007 resolution that the Board provided

13  that talked about how plug-in hybrids including blended

14  mode plug-in hybrids have great benefit.  And I added the

15  language in bold blue which suggests a way that you can

16  actually achieve these larger volumes within the context

17  of the regulation.  However, there's other ways to achieve

18  this, and Member D'Adamo her proposal for larger volumes

19  overall is another way to achieve these larger plug-in

20  volumes.  Thank you very much.

21           CHAIRPERSON NICHOLS:  Thank you.

22           Mayor Loveridge.

23           BOARD MEMBER LOVERIDGE:  The numbers you offer,

24  what are they premised on, the 25, 45, 110?  Where do

25  those numbers come from?

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 1           MR. TONACHEL:  Those numbers start with the staff

 2  proposal in 2012 and then they ramp up at a 40 percent per

 3  year rate.

 4           BOARD MEMBER LOVERIDGE:  That's 40 percent.

 5  Okay.

 6           MR. TONACHEL:  That's right.  That's an increase

 7  in the annual sales year to year.

 8           BOARD MEMBER LOVERIDGE:  Okay.

 9           MR. TONACHEL:  And that can be compared against

10  as I showed in the other slide a 74 percent increase that

11  the Toyota saw with the Prius.

12           CHAIRPERSON NICHOLS:  Great.

13           Mr. Shears.

14           MR. SHEARS:  Good afternoon, Chair Nichols, and

15  members of the Board.  Thank you for the opportunity to

16  comment on the proposed ZEV regulation.  My name is John

17  Shears.  I'm research coordinator with the Center for

18  Energy Efficiency and Renewable Technologies.

19           The focus on my comments today are the classic

20  chicken and egg issue of vehicles and infrastructure in

21  California.

22           CEERT is concerned about the order of magnitude

23  reduction in ZEV numbers proposed by ARB staff for the

24  phase three of the ZEV program from the 25,000 vehicle

25  floor required by the current regulations to the 2500

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 1  vehicles in the February ISOR.  We have offered many

 2  cautions in the past regarding the challenges and

 3  precipitous drop in the pure ZEV numbers could pose when

 4  it comes to ensuring that pure ZEV vehicles are available

 5  for market conditioning and in order for there to be

 6  sufficient build up in infrastructure necessary to support

 7  the required fleet of vehicles in phase four and beyond.

 8           We have also cautioned that a significant

 9  reduction in the number of required pure ZEVs could pose

10  problems for independent component supplier and

11  infrastructure companies.  This raises questions about how

12  the State's perceived commitment to the regulation as

13  indicated in the proceedings as they evolve during this

14  rulemaking may have influenced recent events at companies

15  such as Ballard Power Systems and Hydrogenics.

16           Our colleagues at the Union of Concerned

17  Scientists -- Spencer Quong spoke to this -- have

18  conducted an analysis submitted to the Board earlier this

19  week that estimates that a ten-fold reduction in ZEV

20  numbers in phase three could result in battery, fuel cell,

21  and hydrogen storage manufacturers losing 68 to 135

22  million dollars in revenue due to the decline in vehicle

23  numbers.

24           Moreover, the UCS analysis also determined that

25  the moneys directed toward hydrogen fueling and battery

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 1  charging infrastructure could fall by $163 million in

 2  phase three.

 3           There is a very real danger that in drastically

 4  reducing phase three ZEV numbers there will be

 5  insufficient time and resources available for sufficient

 6  infrastructure due to be deployed to support the fleet

 7  envisioned for California in phase four, thus leading to

 8  further delays in the program and ultimately in meeting

 9  California's longer term air quality goals.  This could

10  also delay the ramp up of the critical climate-friendly

11  vehicle technologies that the state is also seeking to

12  capitalize upon in meeting its 2050 emissions reduction

13  targets.  We note that staff are also recommending a

14  50 percent reduction in the minimum requirement for pure

15  ZEVs to 25,000 vehicles in phase four.

16           Given the millions of vehicles that will have to

17  be introduced into the market and the lag in the turnover

18  of older vehicles in the existing fleet, California needs

19  to start building a pure ZEV fleet sooner rather than

20  later if it is to increase the chances of meeting its

21  longer term air quality and climate goals.

22           We therefore respectfully request the Board

23  ensure there are sufficiently high gold vehicle numbers in

24  place during phase three to serve as the foundation to

25  realistically ramp up the infrastructure needed to support

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 1  the routine daily use of what would otherwise by the

 2  current regulation, not the proposed regulation, equate to

 3  a 20 fold increase in pure ZEV vehicle numbers in phase

 4  four relative to what is proposed in the February ISOR.

 5           As the USC analysis submitted to the Board

 6  earlier this week indicates, that analysis based on data

 7  in the California Energy Commission's AB 1007 report, the

 8  Alternative Fuels Plan, the State would need many hundreds

 9  of thousands of ZEVs by 2020 if it wants to increase its

10  chances of success in meeting its long-term climate goals.

11           CHAIRPERSON NICHOLS:  Your time is up.

12           MR. SHEARS:  I just finished.  We thank you for

13  the opportunity to comment.

14           CHAIRPERSON NICHOLS:  Mr. Choquette.

15           MR. CHOQUETTE:  I'm just a concerned citizen of

16  California.  I don't work for the oil companies, car

17  companies, battery companies, or fuel cell companies.  I'm

18  just giving you my straight opinion here.  I have some

19  recommendations in general and specific suggestions.

20           In general, this mandate needs to be simplified.

21  So simplify instead of complexify.  It seems every version

22  is more and more complex.  There's no need for the

23  advanced ZEV math or alphabet soup.  Keep things simple.

24           You need to strengthen the mandate or drop these

25  changes all together.  Maybe go back to 1990 if that's

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 1  necessary.

 2           Use common sense.  I know you have -- you get the

 3  advice from expert panels, but you can also use your own

 4  common sense.  You'll see what make sense technologically

 5  by what you know.

 6           Needs to be fair.  Again simple.  We also need

 7  transparency of all the ZEV credit business.

 8           Just this morning I was surprised to see there is

 9  a ten to one ratio between fuel cell credits and battery

10  electric vehicles.  That's insane.  Why?

11           As for the specific suggestions, for plug-in

12  hybrid vehicles, basically the silver plus category.  If

13  you're not going to drop everything, you want to keep the

14  current changes.

15           Base the ZEV credits on energy capacity.  This

16  has been mentioned a few times here already.  So basically

17  instead of range, just assign a certain number of

18  kilowatts for one ZEV credit.  Let's make it approximately

19  50 miles for a normal vehicle for one ZEV credit.  And the

20  advantage of this, this gives a lot of flexibility, a lot

21  of freedom to manufacturers.  They don't have to redesign

22  all their cars to make them extremely light so the range

23  is going to be longer and they can use existing vehicles.

24  It will spur a lot of innovation, and it's really also

25  valid for any technology.  It will work for fuel cells,

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 1  hydrogen, whatever.  It's just the amount of energy that's

 2  stored on the vehicle.  It's going to work for delivery

 3  trucks, vans, pickup trucks, small buses.  These are all

 4  vehicles that stay in the city that do a lot of stop and

 5  start driving.  Pollutes a lot could.  Even work for

 6  motorcycles, BEVs, whatever.

 7           So please consider that change alone.  If you are

 8  only going to make one change, make it dependant on the

 9  energy capacity.  And what I would say to auto

10  manufacturers here as my friends know for the last

11  two years I don't own a car.  And if there's no plug, I

12  don't buy it.  So okay.  Thank you.

13           CHAIRPERSON NICHOLS:  So here's a customer.

14           David Turock.

15           MR. TUROCK:  Thank you.  I'm David Turock,

16  retired entrepreneur from New Jersey.

17           Dr. Nichols and members of the Board, nearly

18  every country in the world eventually adopts your air

19  quality standards.  Your bold actions could free billions

20  of people from suffering.  And your failure to act could

21  condemn those same billions to death.

22           I speak from personal experience.  I lost my

23  father to lung cancer recently, fifteen years before the

24  actuarial table said he would leave this earth.  He lived

25  in an area of New Jersey saturated with transportation

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 1  pollution.

 2           The oil companies will go down in history I

 3  believe as the tobacco companies of the 21st century.

 4  They have distracted you with a hydrogen R&D program.

 5  CARB's own analysis is it takes the energy equivalent of

 6  four gallons of gasoline to refine enough hydrogen to move

 7  the car the same distance that one gallon would have

 8  carried it in the first place.  They want you supporting

 9  in the near term a solution that Cal Tech and MIT and

10  other institutions tell us is decades away.  As Mr.

11  Woolsey pointed out earlier, there are solutions, better

12  alternatives that are ready now.

13           In my life, I worked for Noble Prize winning

14  scientists, built laboratories, created new companies and

15  industry, and I meet many interesting people still.  And

16  recently I had an opportunity speak with a Board advisor

17  to two of the largest oil companies.  When I asked him to

18  explain their position on hydrogen he said, "Dave, we

19  spend less than one-tenth of one percent of our resources

20  on hydrogen.  It's an advertising initiative that's

21  designed to make us look green.  It's true that the cheap

22  oil will run out soon, but we have the technology now to

23  extract the increasingly expensive oil and there is

24  another 150 years of that.  Keep your eye on the money.

25  We are.  Hydrogen, maybe in 50 years."

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 1           So given these obvious problems with hydrogen,

 2  why is CARB's initial statement of reasons document so

 3  obviously biased toward this technology?  Shouldn't your

 4  position be one of technological neutrality, setting the

 5  air quality standards and letting the marketplace do the

 6  rest?  Why the complicated system of credits?  And why

 7  allow manufacturers to cheat the system with double

 8  counting travel clauses?  And moreover, why allow them to

 9  endlessly reduce the requirements?  That's the big puzzle.

10           Economic viability I can tell you from starting

11  many different things is impossible without volume.

12  25,000 ZEVs in my opinion is the bare minimum.  Less than

13  that and you run the risk of the entire program becoming

14  irrelevant.

15           When I read this, the weight of the stakeholder

16  lobby is so heavy in it that it's crushing the good that

17  wants to come out of it.

18           Chris Paine and his cameras are here recording

19  your actions for posterity.  And while there may only be

20  100 people in the room tonight, the eyes of the world are

21  on you.  And we are begging you to do the right thing.

22  Please make a bold ZEV mandate happen.  Leave a legacy

23  they'll be proud of when your life draws to a close.  You

24  have the power.  Use it, please.  Thank you.

25           CHAIRPERSON NICHOLS:  Thank you.

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 1           We will now hear from Bill Pascarella.  No.  I

 2  got this wrong.  Stuart Johnson.  Sorry.

 3           MR. JOHNSON:  I'm Stuart Johnson.  I work for

 4  Volkswagen North America.  We're one of the intermediate

 5  companies.  So I can talk specifically about our

 6  situation.

 7           Based on our predicted sales, we will become a

 8  large manufacturer and have a large volume obligation in

 9  the 2015 model year.  That's one reason why we have some

10  concern, because we're coming in right at the 2015 point

11  where there's a big step change in volume.  So we have

12  asked for some kind of ramp to help us get into the

13  program.

14           I can talk a little bit about our fuel cell

15  program too.  We are working on fuel cells.  We're

16  developing our own stack technology.  It's promising.

17  It's a high temperature stack.  We are optimistic about

18  it, but it will not be ready for a 2015 ZEV mandate.

19           What that means to us is that we will be probably

20  introducing a battery electric vehicle and potentially a

21  plug-in hybrid in that time frame leading up to 2015.

22           I just wanted to say that I agreed with the

23  comments that Dan made at the start of the day.  And I

24  have one slide to show.  And it's kind of an artifact of

25  the ZEV mandate.  But it shows here the difference when

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 1  you look at an intermediate volume manufacturer versus a

 2  large volume manufacturer that actually our performance as

 3  an intermediate volume manufacturer is better than it is

 4  when we've become a large manufacturer.

 5           So as you were talking about LEV III and what to

 6  do with PZEVs, I mean this is a message that PZEVs are

 7  actually a great success.  And they're a great success to

 8  the ZEV mandate.  And they significantly lower our NMOG

 9  curve.  We're performing better under the intermediate

10  volume requirement of large numbers of PZEVs than we do as

11  a large volume manufacturer.

12           So I agree with what Dan has said.  I think the

13  program does need to be overhauled.  But from our

14  perspective, the 2015 model year is not far away.  I would

15  urge you to overhaul it quickly and get some numbers out

16  there that we can start to work towards.  Thank you very

17  much.

18           CHAIRPERSON NICHOLS:  Okay.  Thank you.

19           We'll go to the next group of ten.  Doug Korthof,

20  Bill Pascarella, Walter Puetz, Lisa Rosen, Leonard

21  Tramiel, Karl-Heinz Ziwica, David Patterson, Thad Balkman,

22  Besir Dunlap, and Linda Nichols.

23           MR. KORTHOF:  I hope you have this document that

24  I passed around to the Board today.  It has some color

25  pictures on it.  Every picture tells a story.  I'm not

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 1  going to read the whole document, but it makes a lot of

 2  the points that others have made and it goes into some

 3  detail.

 4           I want to talk about other things.  Five years

 5  ago, the Air Resources Board made a wrong turn at the

 6  behest of the auto manufacturers.  And they're asking you

 7  to repeat that same mistake again.

 8           Now, the I hope you'll realize this one fact.  If

 9  you bring nothing else out of this meeting, we don't need

10  research.  The people who are saying we need research or

11  batteries or research program should re-think their well

12  meaning thought.  Research is great.  We need production.

13           Our family has ridden over 500,000 miles in

14  electric cars.  Zero emission vehicle electric cars since

15  CARB once stood by the ZEV mandate.  But there is no the

16  electric car, no ZEV car for sale in the open market now

17  and never will be a fuel cell car because they're far too

18  expensive.

19           But this can be done again.  The only cars -- the

20  only ZEV that are on the street right now in the hands of

21  people are electric cars that were sold in 2002.  And

22  that's all there are.  We don't need research.  We don't

23  need research programs.  We need production.  Production.

24  And the only way we're going to get production is to go

25  against the auto manufacturers.

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 1           What we see in that huge squid job of document

 2  that you're handing out here is the influence of the auto

 3  lobby.  You're seeing a massive lack of courage in facing

 4  up to them.  The idea of being a regulatory Board is that

 5  you have to make hard choices.  You know, we've seen this

 6  in industry.  You know, there's a gradual curb towards a

 7  goal and then it gets more steep and then emergency

 8  recovery plan and then a red team and a swat team.  You're

 9  pushing everything off until the end.

10           And once again you're being asked to do this.

11  Staff is asking you to push it off until 2017 or 2018.  We

12  have these cars now.  We don't need these cars some day.

13  We need them now in massive numbers.  And this can be done

14  if you go up against the auto manufacturers, make them do

15  what they should do.

16           The scandal is that there is no zero emission

17  vehicle for sale now.  It was for sale in 2002.  I'm still

18  driving them and a lot of people are, too.

19           As far as infrastructure, people talk about it as

20  if it's just a matter of putting in some pumps.  No.

21  That's the whole problem.  Hydrogen is extremely expensive

22  to refine, almost impossible to store.  The green

23  infrastructure I have is on my roof.  It's an electric

24  solar power system that produces more electricity than I

25  need to drive two zero emission cars.

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 1           Make no mistake.  You are being asked to weaken

 2  the zero emission mandate in this proposal.  You're being

 3  asked to weaken it and complicate it.

 4           But you don't have to do that.  You can stand

 5  fast.  And the worst that can happen to you is say, well,

 6  we're not going to change it.  Let them stick to their

 7  promises of 2003.  Let them produce their fuel cells cars

 8  they promised.  If they can't, produce the battery

 9  electric cars and sell them on the open market.  None of

10  this business about 43,000 ZEV credits and only 4,556

11  actual ZEV cars on the road.  43,000 credits ZEV gold

12  credits, only 45,060 cars on the road.  And out of those,

13  4400 are battery electric cars most of which were taken

14  off the road because they were on boomerang leases.

15           You need to require production of ZEV cars and

16  sales to buyers who want to buy them.  That will eliminate

17  a lot of the scamming jobs they're doing.  Let them stick

18  to these proposals that they made in 2003.  According to

19  Mercedes Benz, they're going to be in a position to

20  produce 100,000 fuel cell cars by 2015.  If they can do

21  it, the others can too.  Let them stick to their promises.

22  Don't say we're going to weaken the mandate that staff is

23  requesting.  We don't have to do that.

24           You need to stand up for the people and require

25  them to sell ZEV cars, because we're driving them.

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 1  There's a whole bunch of them on the road.  We've taken

 2  pictures of this.  We are going to take pictures of this

 3  too and it's going to be on the record.

 4           CHAIRPERSON NICHOLS:  You're such a good speaker

 5  we didn't dock you for your time.  Thank you.  You carried

 6  on without a breath.  Good work.

 7           Bill Pascarella.

 8           MR. PASCARELLA:  Please excuse me.  This is the

 9  first time I've spoken like this.  I'm a little nervous.

10           I'll Bill Pascarella.  I work for the city of

11  Pasadena Water and Power at a power generating station.

12  US Navy four years prior to that on an aircraft carrier.

13  My experience with the gas turbans and gas fired boilers

14  and such has allowed me to get a lot of understanding of a

15  lot of things.

16           I would just like to say without pushing it too

17  hard, I like the idea of V to G, vehicle to grid.  We're

18  at a distance away from that.  But the idea of having a

19  vehicle that can actually push electricity back onto the

20  grid.  By thinking that way ahead down the road that would

21  help the utilities be able to generate electricity at

22  nighttime when they're idling and be able to pick up the

23  load and prevent peeking units starting up in the

24  afternoon and putting electric cars I think should be

25  looked at down the road and should be a goal that will

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 1  help increase the utilities efficiency along with the

 2  electric vehicles.

 3           So therefore, with that thought in mind, looking

 4  at electric vehicles that have a battery pack that has a

 5  higher KW to give a better credit because it's down the

 6  road.  This is really going to help out the state of

 7  California.  Help out the ISO California independent

 8  supply operators.  And if you have a congested area on the

 9  grid there, like in L.A. SB 15 always has problems, that

10  can assist.

11           The other thing I would like to talk about

12  quickly is about the hydrogen fuel cell cars.  The only

13  thing I haven't heard is if you're talking about the fuel

14  cell car using hydrogen through electrolysis, I'd like you

15  to seriously consider the efficiency.  I know they talk

16  about the efficiency of the car.  If you're doing it

17  through electrolysis, you have to look at you're pumping

18  the water out of the ground.  Those cities are treating

19  that water.  Then it has to go through a treatment plant

20  that has to purify that.  That water then has to go

21  through a lot of different filters and typically a reverse

22  osmosis.  And a certain part of this goes to the sewer

23  system.

24           The sewer system then has to take on that

25  problem.  Those hardness of water, the calcium and all

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 1  that, and has to pump that back to the ocean.  So when you

 2  look at it from the beginning to end, I cannot see how it

 3  worked.

 4           I'd dare to ask the California Air Resources

 5  Board to challenge -- have like a challenge.  For example,

 6  you have a 3,000 watt solar panel.  How far can your car

 7  go on this 3,000 watts during the daytime?  If you're

 8  going to use a fuel cell car, you have to start off with

 9  water.  Can't start off with hydrogen.  And how many miles

10  will it really go against -- I'll even suggest my electric

11  truck.

12           CHAIRPERSON NICHOLS:  That's a really interesting

13  point.  And your time unfortunately is up.

14           I do want to say as far as the grid issue is

15  concerned, I'm aware of several manufacturers that have

16  partnerships with electric utilities where they are

17  testing out that kind of idea you're talking about and

18  optimizing the two systems.  Thank you.

19           Walter Puetz.

20           MR. PUETZ:  Madam Chairman, members of the Board,

21  my name is Walter Puetz.  And I'm in charge of regulatory

22  affairs for Mercedes Benz.  Mercedes Benz is researching

23  and developing and commercializing a portfolio of

24  technologies that will increase fuel efficiency and

25  reduced tailpipe emissions ultimately to zero.  And one of

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 1  these technologies that I would like to highlight is

 2  hydrogen fuel cell vehicles.

 3           We believe fuel cell vehicles have the best

 4  chance of giving customers what they want.  Three-hundred

 5  miles or greater range and fast refueling.  So far we have

 6  spent over one billion dollars in fuel cell vehicle

 7  development.  And recently our top management made another

 8  historic decision, and that is to launch a small series of

 9  fuel cell vehicles in 2010.

10           We are on a path that by 2015 fuel cell vehicles

11  produced in an annual volume of 100,00 or more can be

12  equivalent in cost to a diesel hybrid vehicle.  However,

13  there is one critical point of the commercialization plan

14  that we have little to no control over and the deployment

15  of hydrogen fueling infrastructure in California which has

16  been discussed today already.

17           Through the California Fuel Cell Vehicle

18  Partnership, we work with ARB staff, the auto industry,

19  and energy industry to identity the location of 40 to 50

20  fueling stations that are needed for the next phase of

21  commercialization of fuel cell vehicles in California.

22  Recent events, including the closure of several existing

23  fueling stations and statements by energy companies that

24  there is no interest in deploying new fueling stations,

25  have us very, very concerned.

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 1           Mercedes understands and appreciates the attempt

 2  and proposal of the revised ZEV mandate to be technology

 3  neutral and have the oil industry deciding with which

 4  technology to use for their requirements to be fulfilled.

 5  Unfortunately, the proposal might be understood as a

 6  signal from CARB fuel cell technology is not of interest.

 7  Why?  The new proposal allows OEMs to achieve gold all

 8  credits at the end with plug-in hybrids and battery

 9  electric vehicles.  And as the result of this energy

10  company see higher risk in investing in hydrogen

11  infrastructure.

12           Therefore, we ask the Board, first of all, as a

13  clear signal of CARB commitment, keep a certain number of

14  fuel cell vehicles mandatory in the revised ZEV

15  regulation.  Second, increase the number of gold credits

16  for fuel cell vehicles to reflect the current, high, and

17  long-term consumer benefits.  And third, develop a plan

18  that we can count on to ensure there is a hydrogen

19  infrastructure in California.  Let me say there's always a

20  discussion about chicken and egg.  I say the chicken is

21  already available.  Now we need to see the egg.

22           We thank you for your time and we are open for

23  further discussion on this.  Thank you.

24           CHAIRPERSON NICHOLS:  Thank you.  Questions?

25           Lisa Rosen.

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 1           MS. ROSEN:  Good afternoon, Chairman Nichols and

 2  members of the Board and staff.  Good afternoon.  Thank

 3  you for hearing me.

 4           I really appreciate the vast amount of effort

 5  that's gone into your proposal and your negotiations.  I'm

 6  hard put to think of any deliberative body that is

 7  confronted with as much controversy or important results

 8  that you deal with every day.

 9           I've already submitted my written comments to the

10  Board.  I hope I'll be a considered along with the rest.

11  I'm impressed with your procedure today that gives us an

12  equal footing and an equal opportunity to be heard.

13           I have even one additional thing I would like to

14  propose today and that's a linguistic thing.  I noticed

15  when you talk about vehicles in service, you're talking

16  about placement.  And I guess I take a dim view of

17  placement, because there were vehicles placed with us that

18  were certainly displaced from us, taken away, and crushed.

19  I don't think it does the people of the state any great

20  benefit to have a number of fuel cell vehicles on the road

21  for some testing that may or may not benefit us in the

22  long run if we can't have them permanently in service if

23  they aren't part of a long term solution.

24           I feel like you're in a competition where you're

25  going to be running a triathlon event.  And I think that

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 1  with anything of this nature, there's a tendency to

 2  procrastinate the hard part.  You want to contemplate this

 3  immense event you're going to have to run, the reports

 4  you're going to have to write, the additional things

 5  you're going to have to consider if you're going to revise

 6  it and make the program work.

 7           I urge you to begin on the hardest parts of it

 8  now and make all of us whatever we have to endure in the

 9  way of change and sacrifice to get with the program and

10  start doing it now.

11           I'm reminded of an Indian monitor that we worked

12  with on a rather difficult construction program in

13  southern California.  And at the conclusion of this

14  particular program, which was successful but was not in

15  other cases, he had stood in front of a bull dozer along

16  with other Indian monitors and the program was shut down

17  for 18 months while the matter was conducted to a

18  satisfactory conclusion.  When he spoke at the end of that

19  long time, he said sometimes when you work very hard to

20  get something accomplished and you do the right thing, you

21  can change people's minds and everyone will cooperate.

22  Sometimes you can't change anyone's minds, but you can

23  change their actions.  Sometimes you give it your best and

24  you do every thing you can and nothing changes, but you do

25  have to try.  Thank you.

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 1           CHAIRPERSON NICHOLS:  Thank you.

 2           Are you going to tell us about the t-shirt?  I'll

 3  give you an extra few seconds.

 4           MS. ROSEN:  Being a probation officer give me a

 5  unique understanding of how little people like to be

 6  regulated.  Thank you.

 7           CHAIRPERSON NICHOLS:  Thank you.

 8           MR. TRAMIEL:  I'd like to thank you for the

 9  opportunity to address you today.  Hello my name is

10  Leonard Tramiel, and I'm a recipient of a ZEV incentive

11  for my battery electric vehicle.

12           The weakening of the ZEV mandate in 2003 and the

13  continuation of this in the current proposal saddens me.

14  The details of how to improve the ZEV program is certainly

15  a complex issue, and I will not address that since it has

16  been the subject of lots of input that you've had both in

17  written testimony and orally today.  But I would like you

18  to pay close attention to the information you got from

19  Plug In America.

20           However, I would like to bring one thing up.  In

21  the section of the Initial Statement of Reasons labeled

22  "Effective Proposed Amendments," it states, "The ZEV

23  program continues to provide positive air quality impacts

24  as compared to no program."

25           Is this really the right standard against which

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 1  the program should be compared?  Is better than nothing

 2  really what we as Californians expect from our government

 3  and ourselves?  We have been talking all day about the

 4  numerous states that follow California's lead, our great

 5  world changing technologies, and the claim that we make is

 6  that it's better than nothing?  I don't think that's

 7  right.  Thank you.

 8           CHAIRPERSON NICHOLS:  Thank you.  Good point.

 9           Mr. Ziwica.

10           MR. ZIWICA:  Good afternoon, Chairman Nichols and

11  members of the Board.  My name is Karl Heinz Ziwica.  I

12  appreciate the opportunity to testify on behalf of BMW.

13  We have submitted written comment for your review which

14  focus on the transition of intermediate volume

15  manufacturer to large volume manufacturer.

16           Worldwide, BMW market share is approximately 2

17  percent.  In automotive terms, we are a relatively small

18  manufacturer.  At the present time, BMW is an intermediate

19  volume manufacturer.  Without a change in the current ZEV

20  requirement, BMW will become a large volume manufacturer

21  in California by 2012.  This will have dire consequences

22  to our hydrogen internal combustion engine program which

23  BMW has so heavily invested in over the last 25 years.

24           Currently, we operate 100 hydrogen 7 series

25  vehicles that are built on full scale production

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 1  development program.  Twenty-five of these vehicles are

 2  operated here in the state of California.

 3           BMW has invested nearly half a billion dollars

 4  over the years in these activities without any regulatory

 5  mandate.  Without a change in the ZEV mandate, we will

 6  have to refocus our development efforts away from the

 7  current hydrogen internal combustion engine to

 8  technologies of fuel cell or battery technology.  BMW's

 9  added value to these technologies is at best minimum.

10           In contrast, BMW is a leading company focusing on

11  the advancement of hydrogen internal combustion engines

12  and is now able to demonstrate extremely low emission

13  performance.  We believe this technology is in line with

14  ARB's ZEV goal to achieve the sustainable clean

15  environment, while at the same time maintaining consumer

16  choice in systems.

17           Furthermore, the change in BMW's manufacturer

18  status would have the effect of increasing its average

19  emissions significantly.  Despite the achievements with

20  our hydrogen technology, we still need to pursue

21  additional research and development efforts and to advance

22  efficiency of the engine and storage capability.  In order

23  to demonstrate comparable efficiencies to battery electric

24  or fuel cell vehicles, we need first an investment in

25  research and development over the next years.  To make

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 1  these investments, our board in Munich needs a signal from

 2  you adopting the additional transition period of six years

 3  by as proposed by staff to do that.  We urge you to adopt

 4  it.  Thank you.

 5           CHAIRPERSON NICHOLS:  Thank you.

 6           Mr. Patterson.

 7           (Thereupon an overhead presentation was

 8           presented as follows.)

 9           MR. PATTERSON:  Good afternoon.  My name is David

10  Patterson.  I'm senior manager of Mitsubishi Motors R&D of

11  America.  Thank you very much for your time this

12  afternoon.

13                            --o0o--

14           MR. PATTERSON:  Mitsubishi Motors, we have some

15  specific comments about the regulation.  This shouldn't be

16  a surprise to anyone in the room.

17           Mitsubishi Motors supports the staff proposal

18  creating a new 1.5 EV.  We believe the new type 1.5 EV

19  should not be a city EV.  The definition should include

20  the capability for operation on all classes of roadways

21  and should be a full function EV.  An EV with a 75-mile

22  range has a much greater potential to replace the existing

23  commuter vehicle.

24                            --o0o--

25           MR. PATTERSON:  As we just announced at the New

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 1  York auto show in New York, the IMIEV, Mitsubishi

 2  Innovative Electric Vehicle, this is an example of the

 3  proposed 1.5 battery electric vehicle.  Top speed of 81

 4  miles an hour with a 70 to 80 mile range utilizing

 5  advanced lithium ion batteries.  This would directly

 6  replace an existing or second commuter vehicle.  We have

 7  plans for mass production of thousands planned for Japan

 8  in calendar year 2009.  And we are going to be kicking off

 9  a fleet test here in California in the fall of 2008.

10                            --o0o--

11           MR. PATTERSON:  There occurred a few questions as

12  I read through the ISOR.  One of them was the ZEV

13  discontinuity between battery electrics and plug-in

14  hybrids.  The question being here is a Type 1 battery

15  electric with more or all electric range but it receives

16  three-and-a-half times less credit than a similar plug-in

17  hybrid.  Or also should that same plug-in hybrid have more

18  credit than a Type 4 vehicle?  And we'll just jump right

19  to the solution.  There it is.

20           We should correct this discontinuity.  What we're

21  proposing is there should be a gold to silver credit

22  multiplier that allows the conversion of these gold to

23  silver credits.  I know some in the room is going, David,

24  what are you talking about?  From our standpoint as that

25  immediate volume manufacturer, we're looking at numbers of

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 1  credits, not the classification of credit.

 2                            --o0o--

 3           MR. PATTERSON:  Mitsubishi also supports the

 4  extension of the travel provision for all pure electric

 5  vehicles.  It is important and beneficial to focus our R&D

 6  within California and leverage the existing California

 7  based R&D facilities and charging infrastructure.

 8           It's also important and really recognized that

 9  there's some significant advance technology service

10  facilities that are required to service these vehicles and

11  keep them in operation.

12           And the problem being here if we spread those R&D

13  facilities out and put a program in each and every one of

14  the section 177 states, we'd have a greatly increased

15  complexity in cost by maintaining those redundant

16  facilities.

17                            --o0o--

18           MR. PATTERSON:  The last thing would be we ask

19  for an allowance that allows intermediate volume

20  manufacturers to indefinitely retain gold ZEV credits.  If

21  there's going to be a carry forward and carry back

22  provision, intermediate volume manufacturers have no

23  regulatory requirement to create gold vehicles.  This is a

24  voluntary effort on our part of our company.  And we would

25  like to see that we will be allowed to bank these credits

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 1  to ease a future transition to the large volume

 2  requirements.

 3           CHAIRPERSON NICHOLS:  Okay.  Thank you.  Your

 4  time is up.

 5           MR. PATTERSON:  Okay.  Last slide, I'll walk

 6  away.  I think you've heard it before.  One more.  Thank

 7  you very much.

 8           CHAIRPERSON NICHOLS:  Thank you.

 9           Thad Balkman.

10           MR. BALKMAN:  Thank you, Madam Chair.  I'm Thad

11  Balkman, Vice President of External Relations for Phoenix

12  Motorcars.  And I wanted to come this afternoon to just

13  briefly tell you why from the perspective of Phoenix these

14  modifications, specifically lowering the required ZEVs, is

15  simply not needed.  We at Phoenix Motorcars are making

16  zero emission battery electric vehicles in California, I

17  might add, right now.  We've demonstrated to CARB a

18  ten-minute recharge capacity.  In fact, we are going into

19  production of our first 64 vehicles in April and expect to

20  deliver those in July.  We hope -- we plan by the end of

21  2008 to deliver an additional 350 vehicles.  And we have a

22  waiting list of over 8,000 people that want our cars.

23           The ZEV program in its current state is working.

24  It's allowing companies like ourselves, like Tesla and

25  others to bring zero emission vehicles to the marketplace,

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 1  to consumers who want them, as has been demonstrated

 2  today.

 3           Speaking of consumers, we even had the

 4  opportunity last year to demonstrate our vehicle to

 5  President Bush.  I don't know that he's going to buy one.

 6  But we did get to demonstrate the car to him at the White

 7  House.

 8           The modifications that the Board is considering

 9  are based upon the assumption that the battery technology

10  is not yet available.  And that's simply not the case.  As

11  Dr. Frank testified, Dr. Woolsey testified, the battery

12  technology is here.  Thanks to the ZEV program, Phoenix is

13  set to deliver vehicles this year using zero emission

14  technology.  In fact, I would invite the Board members to

15  take a ride in one of our practical battery electric

16  vehicles at some point.  But I urge you not to adopt these

17  modifications.

18           And I guess to sum it all up, to use a saying I

19  learned back in Oklahoma where I'm from, "If it ain't

20  broke, don't fixed it."

21           CHAIRPERSON NICHOLS:  Thank you.

22           Is Besir Dunlap here?  You were called before.

23           MS. DUNLAP:  Good afternoon.  Yes, Besir Dunlap,

24  an enthusiastic ex-EV1 driver.  Sorry about my voice.  I

25  have my allergies currently.  And so that's the strongest

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 1  I can do.

 2           Currently I'm driving a RAV4 and a Ford Ranger

 3  electric, that I affectionate call the green neck truck.

 4  And, unfortunately, all these three vehicles are not being

 5  built anymore.  I mean the first one was crushed, as you

 6  know, violently.  And the current two cars are charged by

 7  solar panels.  So it's a seriously zero emission vehicle,

 8  both of those, I'd say.  And I shared these vehicles with

 9  my two adult children and my husband.

10           When I entered this building, the first thing

11  that caught my eye, besides the lovely landscape at the

12  entrance, were the banners in the lobby that I hope don't

13  serve only as mere decoration, for they do have some

14  poignant messages, such as:  We do not inherit the earth

15  from our ancestors, but borrow it rather from our

16  children.  And I'm here on behalf of my -- not only my two

17  children but all the others that are not represented here.

18  I happen to be also a teacher.

19           I hope -- I'm here actually to urge you to

20  thoroughly contemplate the severe gravity of your decision

21  that you're just about to make.

22           Another message on one of those banners was:  The

23  supreme reality is the vulnerability of our planet.  And

24  that was by JFK almost half a century ago, but

25  nevertheless still very urgent -- an urgent message.

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 1           So I'd like to urge you to be true to your

 2  original mission and mandate, that is, ensuring clean air;

 3  and if I may stay within the same metaphor, be the

 4  standard-bearer in making sure that the planet's

 5  vulnerability is not perpetuated.  Your allegiance is to

 6  the people you represent and not to some car companies or

 7  other entities.

 8           I want you to acknowledge, embrace, and promote

 9  the technology that is currently available and a reality

10  as demonstrated by GM -- that's prior to their infanticide

11  of the EV1 -- and currently now by Tesla, luckily, as they

12  demonstrated earlier, and also IMU right now -- like just

13  a minute ago.  And so -- and actually with a fraction of

14  all the subsidies that have been going towards the oil

15  companies, we could make Tesla affordable for Ms. Nichols

16  and myself and many others too, with a little bit of that

17  money.

18           Time is --

19           CHAIRPERSON NICHOLS:  Your time is up.

20           MS. DUNLAP:  Okay.  Yeah, exactly.  Time is very

21  costly.  I'm sorry.

22           CHAIRPERSON NICHOLS:  Our time is passing too.

23           MS. DUNLAP:  Well, yes.  And delayed tactics are

24  irresponsible.  I really urge you to make the right

25  decision.

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 1           Thank you very much.

 2           CHAIRPERSON NICHOLS:  Thank you.

 3           All right.  Linda Nichols.

 4           MS. NICHOLS:  Good afternoon.  Today I am

 5  actually representing Rain Forest Action Network.

 6           The staff proposals suggest cutting ZEV

 7  production from 25,000 to 2,500 by the year 2014, which

 8  will of course substantially reduce near-term ZEV

 9  automaker requirements to a production trickle.  As

10  gasoline prices spiral ever upwards, as

11  tailpipe-emission-induced illnesses and premature deaths

12  continue to increase along with greenhouse gas climate

13  change, why would the Board even consider lowering

14  automakers ZEV requirements?

15           Those of us who insist on driving our much

16  appreciated production electric cars, against all odds,

17  are actually paving the way to assist you, CARB, in

18  achieving your clean air goals with battery technology

19  that works now.  And we are glad to do it.  Everyday we

20  demonstrate to CARB and the world that a feasible solution

21  to a myriad of transportation woes already exists.

22           Historically CARB has either been wrestling with

23  or aligning with automakers for 18 long years.  But the

24  glaring fact is that the ZEV program has yet to make zero

25  emission vehicles commercially available.  The ZEV program

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 1  got off to a great start in 1990 when CARB sparked --

 2  sparked the creation of electric vehicles and put more

 3  than 5,000 freeway-capable zero-emission vehicles on the

 4  road, which reduced carbon dioxide by one million metric

 5  tons.  And that's something to be proud of.  Why weaken

 6  the ZEV program now when the Board has the enviable power

 7  to propel our state and then our country towards a

 8  pollution-free future?

 9           Can the Board really imagine that 150, 200 or so

10  zero emission vehicles from each automaker through 2014

11  will accomplish the Board's goals?  Sadly, the staff's

12  initial statement of reasons would result in fewer zero

13  emission vehicles than required in 2003.  Why would the

14  Board choose to move backwards?  Especially now, at this

15  moment in history?

16           Automakers like to argue sometimes and frequently

17  that battery technology is not quite ready for the big

18  time, i.e., mass production of all-electric cars.

19  However, as technology continues to mature, while price

20  per barrel of crude reaches stratospheric levels, that

21  position is getting harder and harder for automakers to

22  defend and CARB to support.

23           CHAIRPERSON NICHOLS:  Ms. Nichols, your time is

24  up.

25           MS. NICHOLS:  One thing is clear.  We're entering

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 1  a new transportation era.  Tesla has set the bar.  And

 2  it's going to happen whether CARB chooses to lead with

 3  all-electric vehicles or chooses to follow with less

 4  available technologies.

 5           Thank you.

 6           CHAIRPERSON NICHOLS:  Thank you.

 7           All right.  We are now down to the last group of

 8  witnesses.  So I will call on you to come forward.  And

 9  then when we finish the list we'll go discussion and

10  questions that the Board, I'm sure, has for the staff

11  about various things we've heard.

12           So we'll start with Lydell Anderson, followed by

13  William Korthof, Sherry Boschert, Tim Carmichael, Phil

14  Baxley, Steve Heckeroth, Cynthia Verdugo-Peralta, and Tom

15  Folks.

16           DR. ANDERSON:  Good afternoon.

17           CHAIRPERSON NICHOLS:  Mr. Anderson.

18           DR. ANDERSON:  Yes.  Actually I'm a physician.

19  And I'm glad to see that Dr. Baums is a physician here.  I

20  believe he's probably -- has the capacity to do more good

21  for the state than any one of us in any other capacity.

22           I'm not here on any environmental special

23  interest group.  But I have seen and highly recommend

24  viewing the movie, "Who killed the electric car?" and Al

25  Gore's "An inconvenient truth."  And if you can see those

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 1  two films and still vote for this amendment, then I don't

 2  know what to say.

 3           My biggest motivation for coming here today is my

 4  five nephews and a niece, to whom I wish to bequeath the

 5  future of clean air and water.  In 1978 -- I may look

 6  young, but I was a high school senior in 1978, and I was

 7  debating whether I should go into engineering.  And an

 8  engineer that I visited told me about the hydrogen fuel

 9  cell that was used on the Apollo mission.  He said that

10  was the future of transportation.  I was so excited about

11  that that -- I brought my 1978 high school annual.  And

12  one of my classmates in chemistry class said, "Keep

13  working on the hydrogen car.  And if you ever need a

14  customer, I'll buy it."  Well, we're here 30 years later.

15  And as far as I can tell, we're very, very far away from

16  getting a fuel cell car commercially available.  There is

17  no infrastructure.  And I don't know how to make hydrogen

18  if you don't use electricity.

19           My oldest nephew is about the same age I was when

20  I first heard about hydrogen fuel cells.  And I've been

21  following it since.  And another 30 years from now I don't

22  want him to have to be here begging for a clean-powered

23  vehicle.  Please vote no on the amendment to weaken zero

24  emission requirements.  California can lead America and

25  America can lead the world.

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 1           Thank you.

 2           CHAIRPERSON NICHOLS:  Thank you, Dr. Anderson.

 3           Bill Korthof.

 4           MR. KORTHOF:  Yes, I'm William Korthof.  I'm a

 5  lifetime resident of the South Coast Air Quality -- AQMD

 6  smog basin, as you might call it.  A business owner and a

 7  ZEV driver for other a decade.  My RAV4 has about 110,000

 8  miles now.  And I have yet to have to take it back for any

 9  routine service or maintenance over that six-year period

10  and over a hundred thousand miles.

11           Smog is still one of our biggest quality-of-life

12  issues in southern California.  Between refineries, older

13  cars that become gross polluters, and just the general

14  emissions that come out of all of our oil-based vehicles,

15  smog is still our biggest problem.  The ZEV mandate is a

16  critical piece of dealing with that.  And according to

17  even our President, we need to kick the oil addiction.  So

18  oil in 1998 was selling at $10 a barrel.  In 2003 it was

19  $25 a barrel.  And today it's over a hundred dollars a

20  barrel.  It seems like we should be able to see the

21  writing on the wall, between that and the fact that we're

22  fighting wars for oil at this point.

23           We've got a proven ZEV alternative.  It's ready

24  to go.  It's been proven.  We've used it.  I'm driving one

25  today.  But we have problems.  Since 2003, thanks to some

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 1  modifications, there's been a ZEV blackout.  There have

 2  been secret deals.  Conflicts of interest have been

 3  pointed out.  And, you know, underlying all this is CARB

 4  has been backsliding.  Your requirements for ZEVs have

 5  been essentially zero since 2002.  And that's got to

 6  reverse.

 7           If we had simply stuck with the 1990 regulations,

 8  we'd have seen 100 to 200,000 zero emission vehicles on

 9  the road every year.  Large numbers.  Even if we assume

10  the high incremental cost that industry was arguing years

11  ago of maybe $10,000 a car, that would represent something

12  like one to two billion dollars a year in subsidies.

13  Interestingly, today we're spending between one and two

14  billion dollars per day for imported oil and we're

15  spending a similar amount on fighting wars in the Middle

16  East.

17           Solutions today, we need to look at going back

18  toward what was promised by that 1990 regulation.  We need

19  ZEVs that are for sale, not on boomerang leases.  And I

20  think the staff needs to look at how they can require that

21  the vehicles be sold so that they don't go back to the

22  manufacturer to be crushed after a nominal trial period.

23  We need to eliminate portable credits.  That should be

24  phased out as quickly as possible.  The cars need to be

25  placed in service.  And there needs to be a real

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 1  commitment to the market by all manufacturers.  Putting

 2  cars on the road in California and then transporting them

 3  to New York for secondary credits raises questions.

 4           CHAIRPERSON NICHOLS:  Thank you, Mr. Korthof.

 5  Your time's up.

 6           MR. KORTHOF:  Thanks.

 7           CHAIRPERSON NICHOLS:  Sherry Boschert.

 8           MS. BOSCHERT:  Yes, hello.  My name's Sherry

 9  Boschert.  And I'm here today on behalf of the 200,000

10  members of Sierra Club California.  I've submitted written

11  comments.  But here's a summary and few additional

12  comments that we hope will strengthen the ZEV program.

13           First and foremost, please require full

14  transparency of the automakers and how they meet the ZEV

15  program, including trading of credits.  The Public Records

16  Act requires no less; just follow the law.

17           Secondly, please make meaningful progress.  The

18  CARB staff very kindly provided me with data showing that

19  compared with today the staff proposal by 2017 would

20  eliminate only one-fifth of the smog-forming emissions

21  from tailpipes that doom thousands of people to lung

22  disease and death.

23           In addition, the proposal would eliminate an

24  average of only 291,000 tons a year of greenhouse gases in

25  2017.  California needs more than 200 times that amount of

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 1  progress to meet our 2020 goals for greenhouse gas

 2  reductions from automobile tailpipes alone.

 3           So Sierra Club California asks that you require

 4  automakers to offer 100,000 zero emission vehicles for

 5  sale in 2012 to 2014.  This is four times more than the

 6  25,000 ZEV requirement, but it still is less than 6,000

 7  ZEVs per year from each of the six largest car companies.

 8  They can do it.  In an industry that sells over 70 million

 9  vehicles worldwide in a single year, 6,000 ZEVs are not

10  going to put any company out of business.

11           Secondly, after setting a strong goal for ZEVs,

12  hold the line.  Don't let 90 percent of that requirement

13  be fulfilled by silver-plus vehicles.  Now, some of you

14  may know that I'm the author of "Plug-in Hybrids, the Cars

15  that will recharge America."  So you know I love plug-in

16  hybrids.  But they should not be in competition with zero

17  emission vehicles.  Find a way to give us both.  And we

18  need both to meet the goals of reducing smog and

19  greenhouse gases.  If you do insist on the backfilling, if

20  you set a high enough bar, like a hundred thousand ZEVs,

21  we would be in favor of no more than 50 percent

22  backfilling with silver-plus vehicles.  And that should

23  not include hydrogen internal combustion engine vehicles,

24  which I haven't heard anyone talk about today, which don't

25  further our drive towards ZEVs and shouldn't be

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 1  silver-plus.  They're just going to be gamed with that.

 2           Please be technologically neutral.  Any ratio or

 3  any system that favors one ZEV technology over another is

 4  only going to delay and possibly even prevent the

 5  commercialization of ZEVs, which is what we need to get

 6  these into the hands of lots of people very soon to meet

 7  our goals.  Progress and battery technology has zoomed

 8  ahead of the conclusions of CARB's expert panel report.

 9  Members of this Board, including Professor Sperling, have

10  acknowledged that the expert panel report is outdated.

11  But the staff and others continue to rely on this, and it

12  infuses many things that CARB is in charge of, the ZEV

13  program, the ETAC report, the low carbon fuel standard,

14  the alternative fuel program.

15           We need better data to inform what you're doing

16  so that we don't get these lopsided arguments in many of

17  these programs that we need to just go with plug-in

18  hybrids and hope that fuel cells will be next.  And

19  battery electric vehicles are left out of many of those

20  scenarios.  So please give us better data as you're moving

21  forward with this bold new vision of revising all these

22  programs.  But today we need a bold commitment to much

23  higher numbers of ZEVs in 2012 to 2014.

24           Thank you.

25           CHAIRPERSON NICHOLS:  Thank you.

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 1           We had made a mistake -- there was a mistake on

 2  my version of the list.  So we left off John White, who

 3  was supposed to have been ahead of Tim Carmichael.

 4           Is he here?  Yes, you are.

 5           All right.  Then why don't you come forward.

 6           And then Tim will be next.

 7           MR. WHITE:  Thank you, Madam Chairman and Board

 8  members.

 9           I was here in 1990, so I have a certain historic

10  perspective on this program.  And I've heard a lot of

11  really excellent testimony today, and I'm not going to try

12  to repeat it.  But I have a couple of thoughts that came

13  to mind as I was reflecting on where we've been and where

14  we might need to go.

15           Well, first of all, It seems to me that we need

16  to return to first principles.  And the first principle we

17  need to get back to is technology-forcing for real.  Not

18  technology-forcing based on projected costs and estimates

19  that we have to come up with to justify the technology.

20  The original principle of the Clean Air Act up was that

21  technology should be driven by the needs of public health

22  and the environment, not based on estimated or projected

23  costs.  And I think inadvertently with the periodic

24  reviews, that we sort of got ourselves boxed into a

25  situation where it becomes incumbent on the staff to prove

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 1  to the car companies that they can do what we need them to

 2  do.  And we need to restore that balance or that burden of

 3  proof on to the car companies and, in fact, to assert the

 4  principle that the public health and the planet's health,

 5  as so well documented in the Lung Association report,

 6  ought to be what drives a policy.  So that's the first

 7  principle.

 8           The second principle is that you all have a lot

 9  of tons to make up because of the failure of the Bush

10  Administration to approve the waiver.  Those are not just

11  tons in California, I might add.  The AB 32 requires that

12  those tons be made up overall.  And I think there's no

13  time than like the present to at least retain the leverage

14  to get those tons.  This is no time to be giving what was

15  estimated to be a $6 billion relaxation to the auto

16  industry when we have other matters outstanding.  So

17  that's the second thing I think we need to keep in mind,

18  is that this is not a disconnected decision from the

19  Pavley, even though it's a separate proceeding and so

20  forth and so on.

21           The other thing is that we need to -- as Jamie

22  Knapp pointed out, we need to get transparency back.  And

23  we lost that sometime ago.  With all these banked,

24  forward-looking -- there's sort of a market mechanism gone

25  array because nobody knows what's going on.  So we need to

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 1  restore transparency.  And this needs to be more than

 2  simply an R&D mandate, which is effectively what I think

 3  the staff proposal would leave us with.

 4           The other thing that has been talked about by

 5  other people that I think is missing from our recent

 6  thinking but wasn't from the very beginning, the early

 7  opponents of the ZEV program were the oil companies, and

 8  they're not here.  Because they somehow found themselves

 9  off the hook.  We got them over here in a low carbon fuel

10  standard, which is -- needs more transparency itself.

11  And, in fact, the low carbon fuel standard needs to have a

12  gold standard associated with the infrastructure planning

13  needed for both electric and hydrogen vehicles.  Now, I'm

14  technology neutral too.  I like plug-ins.  But we got to

15  make sure the electricity from whence the plug-ins are

16  charged is as green as the planet needs it to be.  So that

17  means renewable infrastructure, transmission and

18  distribution infrastructure needs to be integrated with

19  the ZEV program in order for that program to achieve the

20  level of results that we can achieve.  And the oil

21  companies need to give us the hydrogen infrastructure

22  somehow.  We maybe have to help pay for it.

23           CHAIRPERSON NICHOLS:  Thank you.  Your time's up.

24           MR. WHITE:  Thank you.

25           CHAIRPERSON NICHOLS:  Thank you.

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 1           Tim.

 2           MR. CARMICHAEL:  Tim Carmichael, Coalition for

 3  Clean Air.  Thank you for the opportunity to comment.

 4           I agree with everything Mr. White said.

 5           I want to start with a sense of urgency and

 6  encourage the Board to keep this in mind as you deliberate

 7  on this.  Just the news this week:  A massive chunk of

 8  Antarctica breaking off; the inability of the Bush

 9  Administration to get the Saudis to increase their oil

10  production; the stats coming from around the world about

11  the health impacts of air pollution and the number of

12  people dying prematurely.  All three of those, climate,

13  oil dependency reduction, and health impacts, need to be

14  drivers for this agency.

15           The staff has talked about this program as a

16  success.  And though I don't agree that we're at a point

17  where it's just better than nothing, you know, the 600,000

18  vehicles that the staff showed on one of their slides

19  needs to be taken in the context of how many vehicles have

20  been bought in this state since this program started.  And

21  the smallest number you can come up with is 20 million.

22  So you're talking about 600,000 in the context of 20

23  million.  And I think the number's probably bigger than

24  that over the last 17 or 18 years.  And the same thing

25  goes looking forward.  The number of vehicles that are

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 1  going to be sold over the next decade:  In this state, a

 2  million and a half plus per year; 69 million per year

 3  globally -- 69 million new vehicles per year globally.

 4           I think it's important to consider the

 5  fundamentals.  And some of the fundamentals that I think

 6  your staff missed in developing this proposal was the

 7  ramp.  And the reality check, that if we really want to

 8  achieve any of the goals that this program talks about,

 9  even in the staff proposal, but certainly the other

10  programs that this agency's committed to, climate goals,

11  petroleum reduction goals, health protection goals, a ramp

12  is just common sense.  And that's missing from the staff

13  proposal, at least a realistic and assertive ramp from our

14  perspective.

15           The other thing that we think is missing are

16  numbers.  And there's been a lot of talk about the

17  numbers.  And, you know, we think the numbers should be

18  much bigger.  And I personally think 25,000 is the lowest

19  we should go.

20           But I'm looking at, you know, Jim Hanson and

21  others that are talking about the next decade as being the

22  most critical that this planet's ever faced, at least

23  humanity's every faced.  You know, not 2050 but 2020.

24  What can we get done between now and 2020?  Not 40 percent

25  penetration across the fleet but 100 percent penetration

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 1  across the California fleet and most of the US fleet and

 2  most of the global fleet.  I think that's the vision this

 3  Board needs to have as we talk about the next year and how

 4  can we revision this program and make it more than it is

 5  to align it with the goals that this Board has adopted.

 6  That's one of the things that I think staff has not done a

 7  good job of, and they need to do a better job for this

 8  Board going forward, is show how this program and every

 9  other program they bring to you fits into the mission,

10  fits into the achieving the goals that you have adopted,

11  which we support.  And that is fundamental.  Because a

12  program here, a program there, we're not going to get

13  there.  We're not going to achieve our SIP goals, we're

14  not going to achieve our climate goals.  How does this fit

15  in?  And that gives you a better perspective to say, you

16  know what, this is enough or this isn't enough.

17           CHAIRPERSON NICHOLS:  Time's up.

18           Thank you.

19           MR. CARMICHAEL:  Thank you very much.

20           CHAIRPERSON NICHOLS:  Thanks for your help.

21           Mr. Baxley.

22           MR. BAXLEY:  Good afternoon, Chairman Nichols,

23  distinguished Board members.  Thank you for allowing me to

24  speak today.  My name is Phil Baxley.  I'm the President

25  of Shell Hydrogen, one of those big oil companies.  I'm

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 1  President of Shell Hydrogen here in the U.S.  And I also

 2  have the honor of being the Chairman of the Board of the

 3  National Hydrogen Association.

 4           My comments today reflect Shell's views on this

 5  matter.  However, the National Hydrogen Association has

 6  also submitted written testimony that is consistent with

 7  mine.

 8           Through the leadership of the California Fuel

 9  Cell -- California Air Resources Board and the California

10  Fuel Cell Partnership, California has been setting the

11  national and global agenda on issues of energy, air

12  quality, and transportation.  In no small part because of

13  your influence and cultivating a progressive regulatory

14  environment, auto manufacturers are clearly responding and

15  making impressive progress and demonstrating increasingly

16  functional and attractive fuel cell vehicles.  In fact, as

17  Bill Reinert mentioned earlier, as Chairman of the NHA, I

18  invite you next week to come out and see all of the

19  progress that's being made and hear about it.  And

20  actually I invite all of you to come and learn about the

21  facts about hydrogen, about the real efficiency and how

22  you make it and how it can work.  So that's a great

23  opportunity for all of you to learn and I think that's

24  important.  And it's great to hear everyone here.

25           I would also make a comment -- although it's not

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 1  in my notes, that we just finished here in California last

 2  week a construction of a new hydrogen station at a Shell

 3  retail site, using renewable energy.  We're hoping to open

 4  it very soon.  So we're making great progress on that and

 5  we're very pleased with that.  It's very hard but we're

 6  making great progress.

 7           So let me get right down to it.  Despite this

 8  impressive progress on fuel cell vehicles, the draft

 9  statement of reasons has injected a significant degree of

10  uncertainty into the process, sufficient to call into

11  question the approach that has been clearly outlined in

12  the California Hydrogen Highway Program.  This new

13  proposal has caused significant concern among auto and

14  energy companies that are committed to hydrogen fuel cell

15  vehicles and to flex us from the approach we were

16  supporting and working together towards.

17           Specifically, plug-in hybrid vehicles and other

18  technologies still under development appears significantly

19  overweighted in the current proposal.  Plug-in hybrids are

20  also not a silver bullet.  There are a number of

21  authoritative studies indicating that well-to-wheel cost

22  in terms of CO2 emissions for plus-in hybrids can be

23  higher than that of fuel cell vehicles, depending of

24  course on the carbon intensity of the grid-supplied

25  electricity versus the carbon intensity of the hydrogen

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 1  source.

 2           While fuel cell vehicles are potentially a very

 3  promising longer-term solution, other more conventional

 4  alternatives should also be deployed in the near term.

 5  This, however, does not mean that CARB should cease its

 6  encouragement of such major long-term solutions such as

 7  hydrogen fuel cell vehicles.  Shell sees multiple mobility

 8  pathways, and CARB should take the approach of "and"

 9  instead of "or".  It is simply too early now to choose the

10  winning technology; and therefore we should keep all

11  reasonable options open.  To keep such options open, CARB

12  needs to rebalance credits back toward the fuel cell

13  vehicles to better reflect the long-term development costs

14  of this breakthrough technology and the intrinsic

15  environmental and energy security benefits.  By doing so,

16  CARB will also send a clear signal to the auto and energy

17  companies of your sustained long-term support and

18  determination.

19           The State of California is a national and

20  international leader in promoting innovative solutions to

21  transportation and environmental challenges.  This is an

22  important decision facing the Board, a decision that will

23  have far reaching ramifications for the direction of the

24  state and the nation.  CARB should keep the pressure on

25  and provide the leadership needed to develop a truly

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 1  sustainable solution to air quality problems, increased

 2  energy diversity, and addressing the climate changes.

 3           Thank you.

 4           CHAIRPERSON NICHOLS:  Thank you, Mr. Baxley.

 5           Are there any questions from Board members?

 6           All right.  Thank you.

 7           Steve Heckeroth.

 8           MR. HECKEROTH:  My name's Steve Heckeroth.  I'm

 9  the Chair of the Renewable Fuel and Transportation

10  Division of the American Solar Energy Society.

11           I have made comments at every CARB meeting --

12  public meeting since 1992.  I've seen a lot of change in

13  staff and the Board since then.

14           Next slide please.

15                            --o0o--

16           MR. HECKEROTH:  I also manufactured electric

17  vehicles based on the zero emission -- 1990 zero emission

18  mandate.  I was very hopeful that that would be a

19  long-term business.  I made electric Porsche Spiders with

20  a 100-mile range back in 1993, zero to 60 in 8 seconds,

21  proving that electric vehicles weren't golf cart

22  technology even way back then.

23           I've been making electric tractors.  I am the

24  largest full function agricultural electric tractor

25  manufacturer in the world.  I've only done eleven of them.

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 1           (Laughter.)

 2                            --o0o--

 3           MR. HECKEROTH:  I want to talk a little bit about

 4  the potential of solar-charged electric vehicles and it's

 5  potential to reduce CO2 emissions.  This is what we have

 6  to shoot for right here.

 7                            --o0o--

 8           MR. HECKEROTH:  And here's what we have to work

 9  with.  Fifty percent transportation.  Oil refining could

10  also go away if we can limit transportation.  Here's what

11  we're looking at in oil production in California.

12                            --o0o--

13           MR. HECKEROTH:  And here's a chart that you can

14  study maybe later on.  But it just shows -- it's CEC

15  information.  It shows the demand in California; the

16  production going down; the imports going up; and AB 32,

17  what we have to do with that.  So we've got some big

18  challenges.

19                            --o0o--

20           MR. HECKEROTH:  And here's the real good news.

21  That big yellow ball there is the direct solar radiation

22  striking the earth ever year.  And that little

23  multi-colored ball is all the stored resources in the

24  earth.

25                            --o0o--

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 1           MR. HECKEROTH:  So you can see that on an annual

 2  output of solar energy, we've got plenty of solar energy

 3  to satisfy all our electric needs, all our energy needs.

 4           That little black dot there is the oil that we've

 5  used in the last 100 years.  The big yellow dot is the sun

 6  that's come in over the last 100 years and strike the

 7  earth.  It's 70,000 times more solar energy available than

 8  we have oil -- have used oil in the last 100 years.

 9                            --o0o--

10           MR. HECKEROTH:  Burning oil for mobility is

11  unnecessary.  And I hope that we can make the same

12  transition that we made when we stopped burning candles

13  and kerosene very soon.

14                            --o0o--

15           MR. HECKEROTH:  We can rely on an alliance

16  between utilities, PB infrastructure to totally charge all

17  our transportation needs.

18                            --o0o--

19           MR. HECKEROTH:  I hope we can eliminate

20  combustion.

21           CHAIRPERSON NICHOLS:  We agree.

22           MR. HECKEROTH:  And here's what I -- I used to

23  think that the agrarian economy was going to be our

24  savior.  And I tried that.  It's a lot of work.  You can

25  go through a lot of wives trying to grow all your own

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 1  food.  I milked a cow for eight years.

 2           (Laughter.)

 3           MR. HECKEROTH:  I now know it's the solar

 4  electric economy that's going to save us.

 5           (Laughter.)

 6           MR. HECKEROTH:  So please choose wisely.

 7           (Laughter.)

 8           CHAIRPERSON NICHOLS:  Thank you.  That was great.

 9           (Applause.)

10           CHAIRPERSON NICHOLS:  Yeah, this is what makes,

11  you know, public hearings worth while.  We all agree.

12  Otherwise you could just read the stuff, you know.

13           Cynthia Verdugo-Peralta.

14           MS. VERDUGO-PERALTA:  Good afternoon, Madam Chair

15  and Honorable Board members.  And how do I follow that?

16           My name is Cynthia Verdugo-Peralta.  I am the

17  President of the Asthma and Allergy Foundation of America,

18  the Southern California Chapter.

19           We are the ones who have put the nine breath

20  mobiles on the road who administer medical care and

21  medication to school children in the southern California

22  basin.  These breath mobiles actually go to the schools

23  and they take care of the children there instead of the

24  other way around.

25           Our task is not an easy one, as asthma and

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 1  respiratory ailments continue to rise, causing increased

 2  school and work absences due to the cumulative effects of

 3  the air pollution in our basin, 85 percent of which comes

 4  from mobile sources.

 5           I'm also a former South Coast AQMD Board member

 6  and former Chairman of the California Fuel Cell

 7  Partnership.  So I understand the great responsibility you

 8  carry on your shoulders as regulators, as well as the

 9  complexities of new technologies which can help us reach

10  our clean air goals.

11           First, let me command CARB and the CARB staff for

12  all of the hard work that's gone into the original ZEV as

13  well as all of the work on the revision since then.  I

14  know it hasn't been an easy task.

15           My purpose here today is to plead for clean air,

16  knowing we can we cannot get there without state policies

17  that encourage and support a phased approach to a new and

18  cleaner vehicles as well as new fuel technologies.  While

19  we wholeheartedly support the near-term and mid-term

20  pathways, such as battery electric vehicles, BEVs, plug-in

21  hybrids, we are extremely concerned that CARB staff

22  proposal regarding the credit levels does not support the

23  long-term true zero emission vehicles such as hydrogen

24  fuel cell vehicles.

25           The current staff proposal greatly reduces the

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 1  incentive for a more significant potential breakthrough

 2  through fuel cell vehicles.  An important goal of a

 3  technology-forcing policy such as the ZEV program is to

 4  stimulate continued investments in progress while focusing

 5  on the particulate technology option, in this case

 6  hydrogen fuel cell vehicles, for those believing it has

 7  promise and are interested in continuing their investment.

 8           While the ZEV framework expands the gold credit

 9  options, it sends the wrong message.  The new credit

10  structure has the unintended consequences of possibly

11  killing the fuel cell vehicle program and the hydrogen

12  infrastructure investments which local, state, and federal

13  agencies, along with the energy companies and OEMs, have

14  together worked to bring forward here in California.

15           A three-phased approach is needed to reach our

16  clean air goals and reduce toxic emissions from mobile

17  sources throughout the state.  Without support for the

18  third phase, there is no continued vision for the future

19  of zero emission vehicles and the necessary refueling

20  infrastructure.  We encourage CARB to keep the goals high

21  to ensure a robust suite of options, near term, mid term,

22  and long term, to address this critical issue of air

23  pollution.  The ZEV mandate needs to assure that fuel cell

24  vehicles are a viable option for car manufacturers

25  seriously considering production of zero emission

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 1  vehicles.

 2           Phase 3 requirements in terms of the numbers of

 3  fuel cell vehicles, if that is the option that is chosen,

 4  should recognize the high near-term cost for this path, as

 5  was in the original ZEV mandate.

 6           There should be a viable option for those

 7  interested in challenging that most promising technology.

 8  California is the model for a public/private partnership

 9  dedicated to the commercialization of fuel cell vehicles.

10  It started with the activities of the South Coast AQMD in

11  1987 and continued with the establishment of the

12  California Fuel Cell Partner hip in 1999, which has been a

13  unique successful model of bringing together competitors

14  who are cooperatively working towards the goal of fuel

15  cell vehicle commercialization.

16           CHAIRPERSON NICHOLS:  I'm sorry.  Your time has

17  expired.

18           MS. VERDUGO-PERALTA:  Oh, sorry.

19           CHAIRPERSON NICHOLS:  You can sum up.

20           We just basically are asking you to take another

21  six months or so to review the ZEV mandate and bring

22  forward some technology encouraging.

23           CHAIRPERSON NICHOLS:  Thank you.

24           MS. VERDUGO-PERALTA:  Thank you.

25           CHAIRPERSON NICHOLS:  And our last witness is Tom

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 1  Folks.

 2           MR. FOLKS:  Hi.  Can you hear me all right with

 3  this?

 4           CHAIRPERSON NICHOLS:  Yes.

 5           MR. FOLKS:  My name's Tom Folks.  I work for a

 6  company called Mighty Com.  We are here frequently or in

 7  front of your staff representing automotive advanced

 8  technology interests and so forth.  Today I'm representing

 9  no one but myself.  I just wanted to make that clear.

10           Earlier I heard from references to movie

11  recommendations.  And I would like to make another one to

12  you while I'm up here.  In addition to "Who Killed the

13  Electric Car?" and Al Gore's movie, you ought to check out

14  "Thank You for smoking".  As a frequent representative of

15  the diesel industry, I can really -- that was near and

16  dear to my heart.

17           (Laughter.)

18           MR. FOLKS:  Anyway, what I wanted to do was drill

19  down a little bit into the particulars of this requirement

20  and talk about neighborhood electric vehicles.  Our

21  company did quite a bit of research for DaimlerChrysler at

22  the time about user behavior of NEV owners.  And some of

23  you have heard this before.  But the research -- two

24  separate pieces of research, one is a baseline, one

25  two years later of a statistically accurate sampling of

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 1  NEV users, found that people who owned these NEVs used

 2  them for three out of four trips, hands down.  They leave

 3  their vehicles on average in the driveway for three out of

 4  four times.

 5           Ms. Nichols, that may be different for you.  But

 6  on average we found that was the case.

 7           And of those three trips that were taken every

 8  day by someone in the NEV, two-thirds of them were for

 9  three miles or less.  And of those three mile or less

10  trips, three out of four were one mile or less.  So what

11  we found was the metric for success for a NEV wasn't in

12  VMT -- it wasn't in vehicle miles traveled, which seems to

13  be the common metric that's used to measure the worth of

14  an electric vehicle.  So when I heard some previous

15  speaker sort of bad mouthing NEVs, I just felt compelled

16  to throw my name up here and say, "Wait a second."  NEVs

17  actually are a valuable component in the overall ZEV sort

18  of matrix simply because people who have them use them in

19  a really smart way, for these small trips.  And, yes, they

20  reduce cold starts and so forth.

21           But to me, what's really important about this is

22  that -- there are 20,000 of them now in California.  And

23  when you take into consideration the low carbon fuel

24  standard work that's being done now, and there is this

25  need to develop a credit mechanism, a credit scheme in

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 1  some way so that the fuel producers can find a way to

 2  reduce the carbon content of their petroleum-based fuels.

 3  The electric utilities are going to need to find some

 4  customers to plug in, in the short term until we get a

 5  fleet of plug-in hybrids, until we get a big fleet of

 6  battery electrics -- the neighborhood electric vehicle,

 7  20,000 of them exist today that actually can at least

 8  begin the process of credit banking under the low carbon

 9  fuel standard for the electric utilities to begin

10  monitizing -- or providing a currency of low carbon fuel

11  credits at least for the electric vehicle end of the

12  spectrum.

13           So we wanted to -- because of that and because of

14  everything I've just said, I'd like to argue that the ZEV

15  credit for the NEV ought to be .75.  I know some of my

16  friends in the NGO community are going to laugh me out of

17  the room.  But I think it's worthy of that, simply because

18  if you take a look at the math and you see that people who

19  own these drive them for three out of four trips, that's

20  75 percent of their trips, why wouldn't it be worth .75

21  credits.

22           So there you go.  I certainly hope you don't go

23  back on what your staff has recommended of .3, because I

24  think that's a good start but it really ought to be

25  higher.

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 1           So thank you.

 2           CHAIRPERSON NICHOLS:  And you've ended us on a

 3  high note here.  Thank you.

 4           All right.  I am declaring the hearing portion of

 5  this closed at this point.  We've heard all the witnesses.

 6  And now it's time to bring this back to a conversation

 7  with the Board and the staff.

 8           Mr. Hill.

 9           BOARD MEMBER HILL:  Thank you, Madam Chair.  I

10  just wanted to share some thoughts that I've had and based

11  on some of the comments before the public hearing.

12           But first I want to thank the members of the

13  public who were here today.  And the comments were just

14  outstanding.  The information that was presented just kind

15  of guided my thinking and helped tremendously the

16  direction that I think this Board will probably wind up

17  going today.

18           And I also want to thank the staff for the

19  exceptional work and detail and the depth of their

20  investigation over this period of time, just on a personal

21  level.

22           Saying that, you know, I look at zero emission

23  vehicles, they're the California dream of the future.  We

24  should not in the short run give up on that promise of

25  zero emission vehicles.  But giving up is what I think

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 1  some of this proposal before us today represents.  Giving

 2  up is unacceptable and giving in to what I think are some

 3  great influences of the auto manufacturers is intolerable.

 4           Gas, as Mayor Loveridge indicated and testimony

 5  has, is $4 a gallon and a barrel at $100 a barrel.  And

 6  the public is demanding that we adopt policies that reduce

 7  our tremendous impacts from the use of fossil fuels and

 8  our tremendous dependence on foreign oil, and all at the

 9  same time.  Zero emission vehicles do both.

10           What a terrible, terrible signal to send to the

11  people of this state and others around the world if we

12  abandon -- and even the stiff mandates that have been

13  proposed before some of those zero emission vehicles.  I

14  think that that's a terrible message that we would be

15  sending.

16           We've led the nation with AB 32, and the nation

17  looks to California for this leadership.  We must show

18  that leadership today, and I feel this Board is really in

19  a position to do that and to show the leadership and do

20  just that.

21           You know, it's interesting, our country was built

22  and grew great because of innovators, visionaries and risk

23  takers.  And with Tesla Motors, which actually happens to

24  be in the district, in the country that I represent, which

25  is nice.  But also all of the auto manufacturers.  And

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 1  we've seen great innovation over the years.  And I think

 2  they deserve to be congratulated.  And I think this is

 3  just the beginning of what we will see from them in the

 4  future.

 5           So I'm excited about some of the changes that I

 6  think this Board can look at and adopt today.  And If I

 7  could just make a couple of specific comments about the

 8  direction that I'd like to see us go.  It's amazing, if we

 9  didn't change that path in 2003, we could be where I think

10  we wanted to be back in 1990 when we first started this

11  process.  I certainly agree with Professor Sperling's

12  comments of overhauling the program in the next year.  I

13  think that's a good point which to start that.  Good

14  suggestion regarding the spinning off of the bronze and

15  the silver categories.  I think that's a great idea.

16           Also, Board Member D'Adamo's comments of kind of

17  where we've been and where I think she'd like to see us

18  go.  And I think I agree with most of those, especially

19  with regards to the infrastructure issue that was

20  discussed, and she had mentioned it, and certainly there

21  was a lot of discussion there.  We can't succeed without a

22  strong infrastructure.  And I think that's something that

23  we should make sure is part of the program as we go

24  forward.

25           Just looking at a couple of issues as well.

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 1  Looking at a base or a minimum or a floor of the number of

 2  ZEVs, I think that the 25,000 is a good number.  I think

 3  it's a strong number.  And I haven't seen a lot of

 4  reasoning -- and hopefully we'll discuss that and I can be

 5  informed a little more of why we should go much below

 6  that.

 7           I think the sunset of travel provisions has

 8  evolved, and I'd like to see that end sooner rather than

 9  later.

10           The disclosure of bank credits, it's another

11  issue that I haven't really seen why we would look at the

12  production numbers in 2009 and why it's necessary to wait

13  until 2010 for the release of the bank credits that we've

14  talked about.  And I think that the full transparency --

15  and I've said that at previous Board meetings -- is

16  critical and something that's very important to this Board

17  and I think the entire State of California.  The sunset

18  laws that we have are tremendous and it's kept us a very

19  open government.

20           I do hope -- and I'd like to get some responses

21  to those loophole questions that were raised from the

22  Coalition for Clean Air, the Union of Concerned

23  Scientists -- there's a number of them -- and how that

24  will be handled as we move forward to see -- I don't know

25  if we want to get a response to all of those.  But they do

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 1  seem to be -- in looking at them over the last couple of

 2  days, I saw a number of areas here where they made sense

 3  and that there are loopholes are in existence.  And I'd

 4  like to see if that's true and correct or not.

 5           And that really I think kind of just says it all

 6  as I feel at this point.  And I'm just looking forward to

 7  the discussion as we move on each individual item.

 8           So thank you for allowing me that, Madam Chair.

 9           CHAIRPERSON NICHOLS:  Okay.  Of course.

10           I think it is helpful.  You've hit on many of

11  them.  But just to kind of call out the specific areas

12  where Board members want to focus in and potentially offer

13  amendments, but at least get our questions answered,

14  before we move to the big question, which of course is the

15  numbers issue.  But the numbers issue really depends, I

16  think for a number of reasons, on some other things that

17  are related to those numbers in terms of how valid the

18  program is going to be.

19           I think it is interesting, by the way, that

20  there's been this sort of seesaw back and forth all day

21  between people who thought that we were insufficiently

22  giving recognition to batteries and people who thought

23  that we were giving insufficient recognition to the need

24  for hydrogen fuel cells and the progress on each of them.

25  It's almost been like a seesaw back and forth.  And I

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 1  think that really indicates that both of these

 2  technologies, although in perhaps different spaces in

 3  terms of how ready they are to be marketed right away, are

 4  looking to this program as a place that will make a

 5  difference in the future.

 6           I want to reiterate just one thought before we go

 7  back to the list here, which is to remind all of us that

 8  the ZEV program is not the only place where we push for

 9  better cars.  We are pushing in the Pavley program, we're

10  pushing in the LEV program.  It is the only place where

11  we've created this special program aimed at

12  commercialization.  And the difference between programs

13  where we set performance standards, which is really the

14  way that I think most of us believe one ought to go, which

15  is to look only at the need for what comes out of the

16  tailpipe and just set your standards there and let the

17  market compete, versus these very specific requirements

18  that we've gotten into for specific kinds of vehicles, is

19  based on the fact that there is a need for a special push

20  to get people over a certain hump into the marketplace.

21  And that's where we're aiming for wisdom, where we need

22  wisdom about how production ramps up, how people go from

23  invention to testing to building prototypes to putting

24  them in customers' hands.  And I love the comment about

25  placement not being what we want, but really purchase and

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 1  use.  That was a key point, because placement is just kind

 2  of one step along the way.

 3           But for all of that, we still have to deal with

 4  the program as we have it today.  And I think we have to

 5  make some changes in the 2012 to 2014 piece before we can

 6  get to the kind of bigger picture, redoing of the program

 7  that we all I think want to see happen in the next year or

 8  so.

 9           And I see a hand down here.  So while we're doing

10  opening comments, let's go to you.

11           BOARD MEMBER LOVERIDGE:  I was really trying to

12  shorten opening comments and get to specific acts that

13  this Board could take.

14           CHAIRPERSON NICHOLS:  Okay, great.

15           BOARD MEMBER LOVERIDGE:  And thought maybe if --

16  I'd like to beginning I think with Professor Sperling's

17  sort of call for a look at this whole -- as you listen for

18  how many hours we have, it seems to me the importance of

19  what he advocated as we started is even more compelling.

20           And I thought also perhaps you could identity the

21  issues that have come up and we could as a Board see what

22  we could do.  I guess I'm probably -- I should confess.

23  I'm doing this so -- I need to catch a plane.  I was

24  hoping to participate in the vote before I have to go.

25           CHAIRPERSON NICHOLS:  I would like to make sure

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 1  you're able to do that.

 2           Well, let's just get started then.

 3           Oh, go ahead.

 4           BOARD MEMBER RIORDAN:  Well, in recognition -- I

 5  do know you have an issue of -- and several of us do.  I'm

 6  wondering though if staff should be given an opportunity

 7  to at least respond to some of the issues.  And maybe

 8  that's after we make a list.  But we've not really allowed

 9  staff -- in the interest of being sure that everybody had

10  the ability to testify, we really didn't stop and ever

11  say, "And, staff, what do you think of that particulate

12  issue that has been raised?"  At some point in time I

13  would like the benefit of their knowledge.

14           CHAIRPERSON NICHOLS:  I understand.

15           I guess what my hope would be is we would ask

16  them to comment on the issues that were on the list and

17  give us their response on those, if that would suit.

18           Okay.  So here's what I heard, and there's

19  probably more.  A mandate for infrastructure.  Can we do

20  it?  When do we do it?  How should we do it in connection

21  with this program, to make sure that it's viable?

22           The travel provision.  When does it sunset, and

23  why shouldn't we let it sunset?

24           The intermediate manufacturer -- intermediate

25  volume manufacturer issue.  Why can't we just bring them

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 1  into full parity with the larger volume manufacturers.

 2  None of these are small companies, even if they may not

 3  have hit the target in California until recently.

 4           The issue of a credit.  A special credit or more

 5  credit or a separate category recognizing better

 6  batteries -- that not all plug-in hybrids are created

 7  equal.  Basically the volt argument.

 8           The question about how we measure or how we

 9  define the categories of plug-in hybrids in terms of

10  energy versus range.  I want that question answered too.

11  It makes a lot of sense to me.

12           And then the issue of the transparency on the

13  credits.  I think every member of this Board who has

14  spoken to this issue believes that not only should the

15  banks be -- you know, the holdings of the companies be

16  open and available, but also that information about trades

17  should be available.  We're not sure exactly how that

18  would be done.  But we think we should have a mechanism by

19  which anyone can find out if trading has occurred and who

20  traded.

21           Are there others that I've left off the list that

22  need to be put on?

23           BOARD MEMBER D'ADAMO:  I've got a couple.

24           CHAIRPERSON NICHOLS:  Okay.

25           BOARD MEMBER D'ADAMO:  Whether or not we should

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 1  consider a higher credit for an increased range fuel cell

 2  vehicle, 200 mile plus.

 3           CHAIRPERSON NICHOLS:  Right.  Okay.

 4           BOARD MEMBER D'ADAMO:  This would -- I don't know

 5  if it falls in the category of a question or action.  But

 6  banked credits.  There were several witnesses that spoke

 7  about banked credits for ATP ZEVs.  And I don't know if

 8  that falls in the category of a loophole, but I'd like to

 9  hear from staff on that.

10           And then this one seemed like something we ought

11  to credit.  And that is Mitsubishi's request to allow

12  conversion of gold into the silver category.  That seemed

13  reasonable.

14           CHAIRPERSON NICHOLS:  Right.  That was an

15  interesting point, yeah.

16           BOARD MEMBER D'ADAMO:  And then of course the

17  issue of the floor.  I'm sure you have that on the list

18  anyway.

19           CHAIRPERSON NICHOLS:  That comes at the very end.

20           BOARD MEMBER D'ADAMO:  But I had raised the issue

21  of increasing the overall numbers, which I think plays

22  into the goal.

23           CHAIRPERSON NICHOLS:  Yeah, yeah.

24           BOARD MEMBER RIORDAN:  Madam Chair?

25           CHAIRPERSON NICHOLS:  Yes, ma'am.

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 1           BOARD MEMBER RIORDAN:  On travel provisions, the

 2  testimony from the State of New York, maybe staff could

 3  just work in their response to that in the travel

 4  provision item.

 5           CHAIRPERSON NICHOLS:  You got all that?

 6           They do.

 7           All right.  Well, why don't we turn to staff.

 8           More?  Sorry.

 9           BOARD MEMBER LOVERIDGE:  Yeah, I guess you're

10  going to come back to the numbers.  I may not be here when

11  you get here.

12           CHAIRPERSON NICHOLS:  When do you have to leave?

13           BOARD MEMBER LOVERIDGE:  Let me just make the

14  argument that in terms of the ATP ZEVs, I would like the

15  number, if we would call it 75,000.  And I think there has

16  been different kind of calls by two groups.  And one

17  talked about a 40 percent increase.  The South Coast

18  talked about a 50 percent increase.  I'd like to put those

19  on the table.

20           CHAIRPERSON NICHOLS:  Okay.  Thank you.

21           I hope we can get to a vote before you have to

22  depart.

23           All right.  Who's going to handle these,

24  Ms. Bevan or Mr. Cackette?

25           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  We'll

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 1  tag team this, I think.

 2           We'll start with the absolute easiest ones first.

 3           I think the New York requests we have in as

 4  15-day changes on the back table.  Correct?

 5           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

 6  CHIEF BEVAN:  Yes.

 7           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Yeah.

 8  So that one -- we read that and thought that's a pretty

 9  good idea.  We have to get that off the table.

10           More credit for a better plug hybrid electric

11  vehicle.  That was the request to create a new type or

12  additional increment of credit for plug hybrid vehicle

13  that can do fast accelerations and go at high speeds, and

14  more than what you might expect some of the other vehicles

15  to do.  We've had a lot of discussions about that, and we

16  think there's probably some merit to that.  But what the

17  credit is, how much more it is.  And of course as credits

18  go up, numbers of vehicles go down.  And so we think that

19  if you want to do that, maybe we ought to just put that in

20  the 15-day change, and our discussion perhaps could figure

21  out what the boundaries are.

22           The vehicle that GM would produce is a 2.4 credit

23  vehicle.  If you give it too much credit, then it -- you

24  know, our scale, which tries to keep some relative

25  environmental and state of readiness, spread out over a

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 1  number line would get kind of messed up.  So I'm thinking

 2  that the numbers might be, you know, one or two-tenths

 3  more credit would be what would be in play.  And what we

 4  could do is just go out and, you know, suggest that, ask

 5  for comments in the 15-day period and find out what people

 6  other than GM would think.  They obviously would like

 7  more.  But I don't know exactly how it will affect all the

 8  other categories.

 9           CHAIRPERSON NICHOLS:  Well, the vehicles are

10  obviously going to be a lot more attractive too.  So one

11  would assume that they will naturally do well.

12           Anyway --

13           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Well,

14  they'd be more attractive but they'd also be more

15  expensive, because they've got a lot of battery on board.

16  So it's a trade-off of that, I think.  But if that's okay,

17  unless you'd rather try to decide some of that now.

18           CHAIRPERSON NICHOLS:  Well, let's just leave that

19  on the list then.  We're just kind of running through your

20  reactions to these comments.

21           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Okay.

22  Well, let's just go down the list in order then and we'll

23  just tell you whether we have any comments or not.

24           Mandate for infrastructure on hydrogen.  There is

25  a regulation now that mandates infrastructure for various

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 1  fuels.  It's trigger point is quite high, like

 2  20,000-vehicles type number.  And so it wouldn't be -- it

 3  wouldn't work here until we've already failed with fuel

 4  cells at least, because we wouldn't have any -- not the

 5  infrastructure to report.

 6           CHAIRPERSON NICHOLS:  Is that in statute or in

 7  our regulations?

 8           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  It's in

 9  regulation.  It was adopted back in the alcohol fuel days

10  of the 80s.

11           CHAIRPERSON NICHOLS:  So we would need to go back

12  and -- oh, probably can't do that in a 15-day notice.

13  But --

14           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  No,

15  that would have to be looked at as to whether that's the

16  best vehicle for trying to look at infrastructure

17  requirements --

18           CHAIRPERSON NICHOLS:  Well, I heard Mr. White

19  suggest that we do this through the low carbon fuel

20  standard.  But that has a lot of perils of its own to go

21  through.  And I must say that having now spent sometime,

22  you know, at the fuel cell partnership and seeing the

23  struggles that they've had to get the fuel suppliers to

24  match the commitment that the auto companies have made, if

25  we can directly go to something that's focused on a

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 1  regional basis and a smaller number of vehicles as the

 2  trigger for a mandate, I'd like to see us do that.

 3           And the additional idea I think that you raised

 4  of also giving credit to an auto manufacturer if they were

 5  to partner with a fuel supplier would also have some

 6  benefits.  So it could be like three different ways we

 7  could go at this problem.

 8           BOARD MEMBER SPERLING:  Could I chime in on this

 9  one?

10           CHAIRPERSON NICHOLS:  Yes, please.

11           BOARD MEMBER SPERLING:  Let me add my thoughts to

12  this.  I do think -- I mean I would like to send it back

13  to staff to make this a high priority to figure out how to

14  deal with the fuel infrastructure question.  And, you

15  know, if it's a mandate or it's part of that clean fuel

16  provision from 1990, you know, LEV program, we would want

17  to do it in a way that there's a close coordination

18  between the automakers and the fuel suppliers, both in

19  time and place.  And, you know, so I kind of -- you know,

20  I'm personally pretty amenable to a mandate-type program

21  at this very low volume, but that it has to be done in a

22  very strategic way.  So that we don't just say, you know,

23  a company has to do X number of fuel stations and they can

24  sprinkle them wherever they want.  We wouldn't want to do

25  that.  And I'm not quite sure exactly how to orchestrate

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 1  something like that, nor even the mechanism.

 2           But, you know, the one you mentioned sounds like

 3  a good one to look at more closely.  And I would support

 4  what Chairman Nichols said about not putting it into the

 5  low carbon fuel standard.  You know, we've tried to make

 6  that a very pure performance-based, you know,

 7  straightforward as possible program.  And we don't want to

 8  turn that into another ZEV mandate.

 9           CHAIRPERSON NICHOLS:  Okay.  So next on your

10  list.

11           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Next

12  one was travel sunsetting.  And just again as a quick

13  summary, starting in 2012 there's no travel, meaning that

14  the number of silver plus vehicles would be multiplied by

15  that other states that adopt California standards.

16           For BEVs, it would -- that would not start it

17  until 2015, I guess -- yeah, the beginning of 2015.  And

18  for fuel cells it would not start until the beginning of

19  2018.

20           So that's what we've got right now.  It's

21  staggered.  The rationale for why it's staggered like that

22  is twofold.  One is, is the technology truly in the

23  demonstration mode?  If that's the case, we don't really

24  need more demonstrations in more states.  And I think it

25  would be quite unwieldy to have to have 12 more

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 1  demonstrations of various sizes, one to match each of the

 2  states that have adopted us.  And that would be kind of a

 3  fuel cell situation.

 4           On the other end, plug -- and there's a need for

 5  infrastructure to support them, and those other states

 6  don't have the infrastructure.

 7           On the other end of the spectrum is the plug

 8  hybrid vehicles.  And I think we don't see an

 9  infrastructure issue.  They plug into your garage.  And we

10  think they're going to launch from good idea to commercial

11  quantity without going through a big demonstration phase.

12  So that's why we had no travel provision there.  In other

13  words the numbers would get multiplied by the other

14  states.

15           CHAIRPERSON NICHOLS:  I think the big concern

16  that I've heard from my colleagues in other states is with

17  the battery electric vehicles and the sort of protected

18  status that, you know, California wants them and other

19  states would like to have them too.  And they feel that

20  we're holding back on that particulate technology.  I know

21  for Vermont and Massachusetts and perhaps some of the

22  other northeastern states this has been a very contentious

23  issue.  I appreciate the fact that New York is not in

24  exactly the same place.

25           But we are working hard in alliance with our

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 1  sister states now in a number of areas on trying to

 2  advance a national program for dealing with CO2.  I

 3  just -- I feel like I'd prefer to err on the side I guess

 4  of risking that this might be more difficult for the

 5  manufacturers if it would mean that it would be something

 6  that could significantly benefit other states that are

 7  trying to do the same things that we're doing as well.

 8           So maybe you'd want to talk about that, what it

 9  really means --

10           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Well, I

11  think the only -- let me just mention what the maybe not

12  to obvious risk is before you go ahead and discuss this.

13           Because I think the way it really plays out is

14  whether that decision favors fuel cells or not.  Because

15  if doing battery vehicles is made a whole bunch more

16  harder in 2012 through 14 not only from a numbers

17  standpoint but also from the standpoint that these are new

18  technologies, that people have to manage them, worry about

19  them, introduce them through the dealerships, all that

20  kind of stuff -- it's a completely different vehicle -- if

21  that was seen as a big barrier, then it would discourage

22  battery vehicles and tend to shove people more towards

23  fuel cell for the compliance.  That's probably where the

24  hinge point is on all of this.

25           CHAIRPERSON NICHOLS:  Okay.  Just make it

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 1  complicated.  All right.

 2           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  I'm

 3  sorry.

 4           CHAIRPERSON NICHOLS:  Did you have any additional

 5  comment on that?

 6           BOARD MEMBER BERG:  No, I think my overriding

 7  concern is the fact that we're trying to find such a

 8  balance between at what point do we have provable

 9  technology that's ready to go from a concept into the next

10  step of a pilot program and then become commercialized.

11  And from a pure R&D point of view it's my personal opinion

12  that the number of vehicles is not relevant to how quickly

13  it gets to the marketplace.  And actually a good case

14  study is the Tesla car, that roadster.  I asked the Tesla

15  people.  They created 23 cars to bring that car to market.

16  And so I'm really struggling with the fact that the number

17  of cars that we're representing aren't in fact the number

18  of cars.  It's a point system.  And that tweaking a little

19  bit here and a little bit there I'm very uncomfortable,

20  because I don't know what the whole picture looks like by

21  when we're attacking one thing or another, and I'm having

22  a hard time keeping score.

23           CHAIRPERSON NICHOLS:  Good point.

24           Okay.  On with the list.

25           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Well,

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 1  on the intermediate volume manufacturers, I don't think we

 2  have any comment on that.  We have a proposal, and it's,

 3  you know, just whether that's too lax or short.  So we

 4  don't have anything to offer there.

 5           We mentioned the more credit for the Volt.  We

 6  could perhaps do that in the 15-day change and home in on

 7  what the number would be.

 8           The how to define sort of the energy versus range

 9  metric that we use for the plug hybrid vehicles in

10  particular, you know, we've been going with range because

11  that's traditionally what we look at from a pollution

12  standpoint, grams per mile savings, that kind of thing.

13  And so that's been the metric.

14           There is some merit in the idea of using

15  kilowatt-hours.  That's been brought up at a log cabin

16  meeting that we had.  It was advocated by some of the

17  staff of South Coast District.  And some of the enviros

18  have thought there was some merit to it.  We've talked to

19  some of the car companies.  There was some mixed reaction

20  there, but some of them positive too.  What I don't think

21  we can do is figure it out today.  And so what I would

22  suggest there is that perhaps that's something that we

23  need to deal within the redesign a couple of years from

24  now.  I don't think that it's fatal either way.  They're

25  both good metrics.  The question is, well, does one have

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 1  more positive aspects and more directionally correct

 2  signals with it than the other?  So that would be our

 3  comment on that.

 4           Transparency on credits.  The way we wrote the

 5  regulation -- the proposed regulation that affects

 6  trade -- everything's transparent.  But the trades we kind

 7  of didn't make it very clear.  And I think given that the

 8  way we've written it and proposed it, the trades have

 9  probably not made public.  So, you know, if you want to

10  make it public, we'll change the wording so that it's

11  clear that the trades -- that's what would be required.

12           Higher credits for fuel cell vehicles.  We were

13  aware of that debate.  It was on our list of issues.  And

14  so we have some back-up -- the back-up slide that deals

15  with numbers of vehicles and costs if you change that

16  variable and if you change the floor variable.  So at some

17  point in time if you want to talk about those either

18  independently or together, we have a graphic that might

19  help with that.

20           Bank credits for too much silver.  And, again,

21  Alisa said in her presentation -- and I believe that was

22  the question, that it might black out the silver plus

23  vehicles, that was what was raised in the audience.  Is

24  that the sense of what that question was?

25           CHAIRPERSON NICHOLS:  Yes.

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 1           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Then,

 2  you know, we don't think that's going to happen, because

 3  we believe that a number of the manufacturers are -- that

 4  have a lot of credits don't have as many P ZEVs and

 5  conventional silver hybrid vehicles in the marketplace

 6  yet.  And they need those credits to buy down those.  So

 7  we really don't think there will be a lot of credits that

 8  are in the bank today available starting in 2012.  So we

 9  don't see that.

10           We also don't see a logic in it.  If someone is

11  going to put forward silver plus vehicles, which are not

12  demonstrations but might be thousands and thousands of a

13  model of a plug hybrid vehicle, why would they introduce

14  it for one year, two years, or three years and then say,

15  "Oh, I got lots of credit.  I don't want to sell it any

16  more"?  It just wouldn't make any sense, unless of course

17  the technology was failing in the marketplace.

18           So I don't think it's going to have the same kind

19  of impact as what might happen with demonstration levels

20  of BEVs and fuel cell vehicles where, you know, "we're

21  doing 50 this year.  But, boy, we'd really rather not do

22  50 more next year, so let's use credits."  That's what

23  created the blackout in the BEV and fuel cell area.

24           I don't know what the Mitsubishi issue was.

25           CHAIRPERSON NICHOLS:  They want to be able to

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 1  gain gold credits.  And you convert them to silver when

 2  they --

 3           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:

 4           I mean normally if you have a gold credit, you

 5  can spend it down the line, you can spend it on a lower

 6  metal quality.  You know, silver plus silver.  But I think

 7  the problem is that since they're intermediate, they don't

 8  generate gold credits.  And we'll just -- we could go back

 9  and look at the rule and make sure that if that's the

10  case, that we create some way where they -- if they make

11  gold vehicles, they get credit for gold vehicles, and then

12  they could use them anywhere.

13           CHAIRPERSON NICHOLS:  That's what, well, I

14  thought people did, just -- I mean we've assumed that

15  Tesla would get credit for their vehicles.

16           MR. PATTERSON:  The point is the discontinuity

17  between gold and silver.  Silver could get seven credits,

18  where a gold vehicle could get a maximum of five.  There

19  needs to be a conversion factor between gold and silver.

20           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:

21           Analisa's going to jump on this one.

22           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

23           CHIEF BEVAN:  What Mr. Patterson is talking about

24  is that in certain cases if there's a plug-in hybrid

25  electric vehicle introduced in the 2009 to 2011 timeframe,

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 1  it has a multiplier of three, which pops its credit if

 2  it's got -- if it's earning, say, two credits, it makes it

 3  six.  And that's much more than a gold vehicle, which

 4  Mitsubishi make, which would be earning about three

 5  credits.  So they're asking that we take a look at that

 6  inequity, given that they don't need gold credits as an

 7  intermediate manufacturer.

 8           CHAIRPERSON NICHOLS:  Right.

 9           Is the staff agreeable to doing that?

10           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

11           CHIEF BEVAN:  We'll look at that.

12           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Yeah,

13  we could certainly look at that and make a proposal in the

14  15-day change.

15           CHAIRPERSON NICHOLS:  Okay.  All right.  Fine.

16           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  And

17  then I guess the last one was the general comment about

18  the 40 percent ramp-up of silver-plus plug hybrid electric

19  type vehicles over time.  And if you look at the --

20  remember the chart that I think Luke Tonachel put up there

21  that showed the Prius introduction versus the numbers of

22  plug hybrids that we have, our numbers sort of did match

23  what happened in the first three years with the Prius.

24  Which is typical that, you know, the early adopters buy

25  some and then there's kind of a stagnation period because

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 1  prices are high and the product is new.  And this is true

 2  of cell phones and microwaves as well.  And then all of a

 3  sudden it takes off when people see the utility and when

 4  the volume gets up enough to drop the price.  And our line

 5  just kept going flat in the 2015 through 17, and the Prius

 6  of course took off.  And they're saying, "Well, make it

 7  take off."

 8           So I think we match up pretty closely to what's

 9  likely to happen in '12 through '14, but we don't in '15

10  and beyond.  And part of the reason we don't is because of

11  the way the reg is structured right now, we have this

12  where you push in on one side, something else pops out.

13  So if you want more ZEVs, you get fewer plug-in hybrid

14  vehicles.  They're all connected in some way.  And what we

15  need to do is disconnect that.  And I think again we would

16  suggest we do that in the redesign for 2015 through 17,

17  because I think we're not that far off from '12 through

18  '14.

19           CHAIRPERSON NICHOLS:  That is definitely an issue

20  that needs to be addressed though as part of fixing this

21  program.  The big fix that we're talking about.

22           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  That

23  was the list that I have.

24           And so what's left is the floor and the --

25           CHAIRPERSON NICHOLS:  Thank you.

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 1           Yes.

 2           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  What we

 3  did discuss is the floor and the fuel gold credit --

 4  relative credit.

 5           CHAIRPERSON NICHOLS:  Right.

 6           BOARD MEMBER HILL:  -- these tentative loopholes

 7  that were mentioned.

 8           CHAIRPERSON NICHOLS:  Oh, the tentative -- the

 9  loophole list?

10           BOARD MEMBER HILL:  The loopholes that were

11  discussed.  I mean there are a number of them.  There are

12  nine that are sort of listed here.  And I don't know --

13           CHAIRPERSON NICHOLS:  NRDC's list?

14           BOARD MEMBER HILL:  Yeah, that's in the group

15  of -- Coalition for Clean Air.  I mean -- and some of them

16  seem -- you know, defining the advanced battery to -- do

17  you have a copy of that, Tom?

18           You know, I don't know if we need to go through

19  every one of them or how that could be reviewed to see

20  if --

21           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Well,

22  there's nine, as I recall.

23           BOARD MEMBER HILL:  Right.  Maybe if you'd like

24  to see if that would work.

25           CHAIRPERSON NICHOLS:  If you have it in front of

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 1  you, you --

 2           BOARD MEMBER HILL:  I'm concerned about Mayor

 3  Loveridge this time because --

 4           CHAIRPERSON NICHOLS:  Right.

 5           All right.  We'd previously been warned that

 6  Mayor Loveridge was going to have to leave because he has

 7  an event back at home that he has to get to tonight,

 8  unfortunately.  But, you know, his heart is with us.

 9           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Well,

10  there's two suggestions.  One, when we were talking to the

11  authors of this, they told me at least that their desire

12  was to put them on the table and then make sure they got

13  looked at, not necessarily today.  So one option is to see

14  if there are any, you know, legitimate concerns here, real

15  concerns, and try to deal with them in 15 day if they're

16  not too far -- you know, if they're relatively minor

17  changes.  Or at your request, we can try to go through

18  them one at a time.

19           BOARD MEMBER HILL:  I think that's fine, Madam

20  Chair, because some of these we've already talked about.

21           CHAIRPERSON NICHOLS:  A couple of them we've

22  already dealt with that rose to our attention, especially

23  the last one about the extension of the timeline for the

24  intermediate volume and the travel issue.  Some of these

25  others were raised, but I think the Board would like to

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 1  see them dealt with later, at least speaking for myself.

 2           BOARD MEMBER HILL:  Yeah, I think so.

 3           CHAIRPERSON NICHOLS:  They're legitimate issues,

 4  but they're rather dependant on other changes that may be

 5  made to the program.  So I think we can leave it at that.

 6           The resolution that was presented to us about

 7  strengthening the credit for plug-in hybrids, we talked

 8  about that.  So, yeah.

 9           Okay.  So I think the time has come for some

10  proposals then and look up numbers.

11           BOARD MEMBER BERG:  Madam Chair?

12           CHAIRPERSON NICHOLS:  Yes.

13           BOARD MEMBER BERG:  Could I just suggest as a

14  matter of moving forward, if we could look at Professor

15  Sperling's idea or motion, maybe this would be an

16  appropriate time to propose the motion to deal with the

17  future piece.

18           CHAIRPERSON NICHOLS:  Yes.

19           BOARD MEMBER BERG:  So that then I can check that

20  off my list of trying to keep things in some perspective.

21  And then maybe we could address specifically the 2012-2014

22  timeline.  And I may be able to get my arms around that.

23           CHAIRPERSON NICHOLS:  Good.

24           All right.  Well -- excuse me.

25           ACTING CHIEF COUNSEL JENNE:  Chairman Nichols,

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 1  before we get too much farther, I just wanted to mention

 2  two very quick procedural matters.

 3           CHAIRPERSON NICHOLS:  Yes.

 4           ACTING CHIEF COUNSEL JENNE:  One is, although the

 5  record is closed now, it will be reopened during the

 6  15-day notice of public availability.  And the written or

 7  oral comments received after today's hearing but before

 8  the 15-day notice is issued will not be accepted as part

 9  of the official record.  And when the record is reopened,

10  the public may submit written comments on the proposed

11  changes.

12           And the second item is to remind that we need to

13  do the ex parte statements either now or after the

14  resolution sometime.

15           CHAIRPERSON NICHOLS:  Thank you.

16           You know, I want to ask a question about that,

17  because they're going to be lengthy, I think.  Although we

18  did receive an indication that if one of us goes forward

19  with their list, the others could just say, "Me too," and

20  not have to read it all.  But even so, in other situations

21  that I'm familiar with people just file their ex partes

22  with the clerk and then they're available to be reviewed,

23  as opposed to having to be read out loud.

24           I'm perfectly willing to go through this list.

25  I'm just worried about the time it may take.

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 1           CHIEF COUNSEL JENNE:  I understand.  My

 2  understanding is that they're supposed to be read on the

 3  record so people here can hear them.

 4           CHAIRPERSON NICHOLS:  Okay, fine.  We'll do it

 5  then.

 6           Let's actually clarify what the resolution is

 7  that we're looking at first though.  This is the

 8  resolution that -- or I took it as a resolution without

 9  having written it up, and we haven't written it up.  But

10  it was based on the comment -- and I'll see if I can

11  restate it and then it can be tweaked by others from

12  Professor Sperling -- that the Board direct the staff to

13  review the ZEV, LEV, and Pavley programs from the

14  perspective of the Board's mission, which we're defining

15  as being to reduce smog-forming pollution, to address the

16  problem of the state's contribution to global warming, and

17  to reduce our dependence on petroleum, all of which are

18  mandates that we're required to consider; and to come back

19  to us with a set of recommendations which we'd like to

20  have at least the beginning of the process within a year,

21  I think, at least have the first phase of this before us

22  to start looking at within a year, that would both move us

23  forward as aggressively as possible towards addressing all

24  three of those missions and also to clean up or to

25  simplify the ZEV program in a way that returns it to its

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 1  roots as a pure technology commercialization program for

 2  the most advanced pre-commercial technology vehicles that

 3  we're trying to get to be commercial.

 4           Is that an accurate statement?  Or you can amend

 5  it.

 6           BOARD MEMBER SPERLING:  Or refine it.

 7           CHAIRPERSON NICHOLS:  Would you refine it?

 8  Right.

 9           BOARD MEMBER SPERLING:  I will defer to you on

10  terms of the timing.  But I would have thought that we

11  probably should wait a year -- start the process in a

12  year.  But -- you know, I'm seeing the staff nodding their

13  heads over there.

14           CHAIRPERSON NICHOLS:  I meant they would be doing

15  the work and bringing us the proposal within a year.

16           No, you think that's too fast?

17           BOARD MEMBER SPERLING:  I mean it seemed -- you

18  know, it seems to me if we're adopting rules now, as long

19  as we provide some insight into our thinking about what

20  our expectations are so that, you know, the industry is

21  not taken by surprise but gives them some sense of the

22  body, then perhaps, you know, more than a year might be

23  fine.

24           CHAIRPERSON NICHOLS:  Well, maybe I'm just

25  impatient.  I don't want to ask the impossible.  But I'd

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 1  like to see this done in 2009 if there's any way that we

 2  can, because of our AB 32 requirements that are also --

 3           BOARD MEMBER SPERLING:  That's true.

 4           CHAIRPERSON NICHOLS:  -- kicking in.

 5           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Just

 6  one consideration is, you know, we can't do Pavley 2 right

 7  now because we can't do Pavley 1 because we've been denied

 8  the waiver.  So the whole structure that you discussed is

 9  kind of predicated on us getting that waiver first, and

10  I'm not sure that we're going to -- you know, when exactly

11  we will get it.

12           CHAIRPERSON NICHOLS:  January 21, 2009.

13           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  I hope

14  you are right.

15           CHAIRPERSON NICHOLS:  No questions about that

16  one.  If not before.

17           BOARD MEMBER SPERLING:  In any case, for the --

18  you know, the rest of it would be -- I think to add just a

19  little more substance to what we're suggesting, it would

20  be -- the idea would be to spin off, you know, the bronze

21  category, the P ZEV, into LEV III, to spin off the silver

22  category into the Pavley program, and keep only the gold

23  categories, as Chairman Nichols said, that would be just

24  battery EVs, fuel cells, and plug-in hybrids, where we

25  would define plug-in hybrids as one of the ZEV

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 1  technologies.  And that the other part of it would be that

 2  it would be our intent that, this being focused on the

 3  2015-plus time period, that that program would be at least

 4  as aggressive as what exists now and probably much more so

 5  as we focus more explicitly on the AB 32 goals.

 6           CHAIRPERSON NICHOLS:  And if that was the motion,

 7  I was the seconder for that motion.

 8           So is there further discussion?

 9           Yes.

10           BOARD MEMBER D'ADAMO:  I'm Just wondering on

11  process.  Do you want to adopt that separately and then

12  move on to the other --

13           CHAIRPERSON NICHOLS:  I think that was -- Sandy's

14  suggestion was that it would be better to that out and,

15  you know, have it resolved, and then we can move on.

16           BOARD MEMBER RIORDAN:  Right.  And it's on the

17  table.

18           CHAIRPERSON NICHOLS:  Yes, it is on the table.

19  And so --

20           BOARD MEMBER BAUMS:  I'd just like a

21  clarification on the timing.

22           So did your impatience win out?

23           CHAIRPERSON NICHOLS:  Well, we hadn't really --

24  we have not resolved that completely.  That was left a

25  little bit open-ended.  I guess I would just say that the

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 1  Board wants to see this back as soon as it's feasible, and

 2  understanding that it's going to take the staff some time

 3  to do this work.  And that we're not asking for the

 4  impossible, but we would like this to be a high priority.

 5           BOARD MEMBER HILL:  With the goal, Madam Chair,

 6  by the end of next year?

 7           CHAIRPERSON NICHOLS:  The goal would be that by

 8  the end of next year we could have this in front of us as

 9  a full -- for a full discussion.

10           Does that seem -- are we getting -- we're getting

11  partial nods.

12           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:

13           It's whatever you want, we'll do it.

14           CHAIRPERSON NICHOLS:  All right.  They'll do it.

15           Okay.  So, yes, that would be the timeline.

16           All right.  So do we have any further comments,

17  questions, discussion?

18           All right.  All in favor please say aye.

19           (Ayes.)

20           Any opposed?

21           All right.  So we know where we're headed.  Now

22  we need to decide what we're going to do with the matter

23  that's before us right now.

24           And I guess before we get into the resolutions,

25  we might as well get these ex partes out of the way.  I'm

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 1  guessing that I have more than the rest of you do.  So I'm

 2  going to start.  And then everybody else can just say, "I

 3  have the same, except I didn't have X" or "I did have"

 4  something else.

 5           So do we need to do the timing of the meeting and

 6  all the other details, Mr. Jenne, or just the statement

 7  that there was a meeting and what the substance was?

 8           CHIEF COUNSEL JENNE:  I think it's good enough if

 9  you just mention that there was a meeting during the, you

10  know, public comment period.

11           CHAIRPERSON NICHOLS:  Okay.  Mine start in

12  February with a meeting with Mitsubishi.  I had a meeting

13  with BMW.  I met with Friends of the Earth and Plug In

14  America.  And these were all in-person meetings.  I met

15  with Dean Kato representing Toyota separately.  And then I

16  met with a number of Toyota executives in person.  I met

17  by telephone with Cynthia Verdugo-Peralta.  I've met in

18  person with Al Weverstad and others from General Motors.

19  Met with a group of environmentalists through the ZEV

20  Alliance, which included NRDC, Coalition for Clean Air,

21  Union of Concerned Scientists, America Lung Association,

22  Sierra Club, Energy Independence Now.  I met with Nissan

23  in person.  I met with the California Electric

24  Transportation Coalition by phone.  Met with Google in

25  person.  I met with Tesla in person, as I previously

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 1  discussed.  Met with Ford Motor Company here in

 2  Sacramento.  And of course I've also met with the Fuel

 3  Cell Partnership, which is a list of individuals too long

 4  to read, but essentially most of the auto companies and a

 5  number of fuels suppliers.  We didn't discuss ZEV

 6  amendments per se.  But I think the issue about fuel and

 7  how to get the fuel there for the vehicles was certainly

 8  on the table, so I put that on my list as well.

 9           So we can start down at the end here with you,

10  Dr. Baums.

11           BOARD MEMBER BAUMS:  Well, I've only met with

12  people on your list, different timing.  The only

13  difference might be that I met with Bonnie Holmes-Gen of

14  the American Lung Association over the phone last week.

15           CHAIRPERSON NICHOLS:  Okay.  Great.

16           By the way, I guess I should say, in all of these

17  meetings people presented the same information that they

18  presented either in their written comments or their oral

19  comments today.  So I didn't learn anything that isn't

20  already in the record.

21           BOARD MEMBER BERG:  I met with also the people on

22  your list starting in February.  And I didn't meet with

23  anybody in addition to that.

24           BOARD MEMBER RIORDAN:  Madam Chair, in March I'd

25  met with Nissan, Ford, and Google Dot Org.  And, again,

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 1  their comments reflected what their testimony was today.

 2           And I'll provide a list for the record.

 3           CHAIRPERSON NICHOLS:  Okay.

 4           BOARD MEMBER SPERLING:  Chairman Nichols, I think

 5  I matched you, with one other -- there was only one other

 6  one.  I met with Ben Oshinsky, who's part of a start-up

 7  company for electric vehicles -- or for plug-in hybrids.

 8           BOARD MEMBER D'ADAMO:  I met with the same

 9  individuals that the Chair did, with the exception of I

10  did not meet with Ms. Peralta or with the Fuel Cell

11  Partnership.  And then I was trying to go through pretty

12  quickly here.  I don't know if I heard you mention Daimler

13  or not, but I did meet with Daimler.

14           CHAIRPERSON NICHOLS:  I did not mention them

15  because I don't think they're on my lift, but they should

16  be.

17           BOARD MEMBER D'ADAMO:  So I met with Bill Craven,

18  Walter Puetz, and Christian Morishideck on March 10th.

19           BOARD MEMBER SPERLING:  Ditto for me.

20           CHAIRPERSON NICHOLS:  Thank you.

21           BOARD MEMBER HILL:  Madam Chair, I met with the

22  same organizations and individuals.  I don't know if you

23  mentioned Dave Modisette of the California Electric

24  Transportation Coalition, but I met with him also.  And

25  also BMW in February.  I think you mentioned that.  But

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 1  it's not on my list.  So thank you.

 2           CHAIRPERSON NICHOLS:  All right.

 3           BOARD MEMBER BERG:  Madam Chair, may I just

 4  clarify that I did not meet with everybody on your list.

 5  I think we're going to have a problem with the Brown Act

 6  here.  I think they have to stay within a certain number

 7  of Board members.  But I also will submit a list for

 8  clarification.

 9           BOARD MEMBER BAUMS:  And I have that same

10  clarification as well.

11           CHAIRPERSON NICHOLS:  All right.  Obviously we

12  all had meetings and have been working diligently to try

13  to understand what our options are here.  And, you know,

14  speaking for myself, if I could just leave this where it

15  was and not make any changes at all, that would be my

16  preference until we got to the point of our resolution.

17           I am concerned by all of the pleas that we've

18  heard about the signals that we send with what we do or

19  don't do today, because everything is interpreted as a

20  signal, even though what we're talking about is 2012 to

21  2014, and by that period of time I'm hoping that we are

22  going to have our new revised ZEV program in place.  And

23  therefore in a sense except for things like getting the

24  credit straightened out, you know, the transparency issue

25  resolved, it's almost in a way moot if we are able to

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 1  increase the numbers substantially.

 2           But the staff report recommends a floor for the

 3  gold ZEVs which I think is just too low.  And I think -- I

 4  want to honor the work that our staff did and the

 5  seriousness of their intention to try to keep this program

 6  moving forward while at the same time not upsetting the

 7  apple cart with numbers that they feel are just not doable

 8  in the timeframe or not likely to be doable.

 9           At the same time they've gotten more optimistic

10  since the expert panel came out.  And I think we've all

11  gotten more optimistic as we think not only about what the

12  needs of California are, but about the needs of the

13  country and the need to make sure that the auto companies

14  understand that this is not just a collaborative effort

15  that we're involved in with them, that it really is a

16  serious push on our part to transform the auto fleets.  So

17  there's a lot of tension around those numbers.  And I

18  think that there's a need to move them upwards

19  significantly.  But I'm not sure that we can just leave

20  things where they would have been if we hadn't, you know,

21  gone down the path that the Board went down in the past

22  with making the alterations that they made in the program,

23  you know, every time they revisited it from 1990 on.

24           So I'm kind of looking to my right because I

25  think both of the two individuals to my right have done

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 1  more thinking about the various trade-offs among the

 2  different numbers.  And I'm just going to ask you for your

 3  thoughts about what you think is doable.

 4           BOARD MEMBER D'ADAMO:  Well, maybe if I could

 5  just start off here.  I agree with you, Madam Chair, about

 6  maybe we ought to just leave things the way they are.

 7  Because those numbers are bold, and back where we left off

 8  in 2003 there was a sense that those numbers could be met.

 9  But when this came before us, I think it was in May, I was

10  really struggling with that same issue at the time, and

11  then I viewed it as an opportunity to make up for some

12  lost ground.  And so I think that if we were to make a

13  couple of changes so that we could get a good increase in

14  BEVs and in plug-ins, then in fact we have made up for

15  some lost ground and the numbers and the backfill and the

16  credit, if it would -- the various credit schemes, if it

17  would actually result in real numbers, then I feel that I

18  could walk away feeling that we have made a significant

19  change.

20           And the other point that I think is very crucial

21  is that -- I really appreciate Professor Sperling's motion

22  about transforming the whole program.  But we've got to

23  send a very strong message so that as staff moves forward,

24  the stakeholders realize we mean business in whatever it

25  is we're going to do when we transform the program.

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 1           So in light of that, I would like to make a

 2  motion that we increase the floor to 10,000 and that we

 3  also increase the number in Phase 3 -- right now we have

 4  25,000 for the overall number for Phase 3 -- I would like

 5  to make a motion that we increase that to 40.  And that we

 6  leave staff with the discretion to determine exactly what

 7  level of credit would be provided for for an increased

 8  credit for a fuel cell with the maximum range of -- with a

 9  range of 200 plus, and also that extended range plug-in.

10  No matter what we do here, if we make some changes to

11  those credits, it could have an impact in the overall

12  numbers.

13           And just one last point.  The reason I feel it's

14  important to increase the overall number beyond 25,000 is

15  because if we increase the floor, then we're going to be

16  robbing from the category of the silver plus.  And so

17  that's the only way to deal with that conundrum.

18           CHAIRPERSON NICHOLS:  Do we have a second for

19  that motion?

20           BOARD MEMBER HILL:  I will second that motion.  I

21  think that's a good compromise and a reasonable solution.

22           BOARD MEMBER RIORDAN:  A clarification.

23           So essentially we're changing the minimum goal to

24  10,000, correct?  Is that right?  Is that what you're

25  saying?

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 1           CHAIRPERSON NICHOLS:  Uh-huh.  That's the

 2  proposal.

 3           BOARD MEMBER RIORDAN:  And the gold only to 40,

 4  right?

 5           CHAIRPERSON NICHOLS:  The total.

 6           BOARD MEMBER SPERLING:  The total.

 7           CHAIRPERSON NICHOLS:  The total.  The gold only

 8  would be the 10 -- or I mean the floor is the 10.  And 40

 9  is the overall.

10           BOARD MEMBER D'ADAMO:  And, Madam Chair, what I

11  would suggest also -- I know Professor Sperling has much

12  more experience in this area and has been very thoughtful

13  about some other alternatives.  I think if we turn it over

14  to him and staff, I think he's prepared a chart, that

15  might help to put some better perspective on these

16  numbers.

17           CHAIRPERSON NICHOLS:  Let's have some -- we can

18  have some discussion on that motion.  And it may be that

19  we'll want to consider some amendments.

20           All right.  So do we have a chart?

21           BOARD MEMBER D'ADAMO:  Do you have a chart?

22           BOARD MEMBER SPERLING:  Yes.

23           BOARD MEMBER D'ADAMO:  Where's this chart?

24           CHAIRPERSON NICHOLS:  Where is the chart?

25           BOARD MEMBER RIORDAN:  I made my own chart and it

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 1  was obviously wrong.

 2           BOARD MEMBER SPERLING:  So let me talk about what

 3  chart she's referring to.

 4           So this chart, I'll give a lead-in for it.  My

 5  colleague here, Dede D'Adamo, has come up with a -- you

 6  know, I think reflects the frustration of a lot of us

 7  that, you know, this has been a long path that we've been

 8  following since 1990.  And it's been frustrating because a

 9  lot of us would like to see the advanced technologies, the

10  ZEV technologies come into being.  And there have been

11  hiccups, is one way to describe it.

12           But let me come up with another counter-proposal.

13  Well, here lays out -- some of the, you know, ways to

14  think about it is the first row there is the staff

15  proposal.  It's 2500 for the gold.  And then if you add in

16  how many -- what that means in terms of total vehicles,

17  you have -- there's a lot of the plug-in hybrids that

18  follow.  And so the total --

19           CHAIRPERSON NICHOLS:  That's the total that you

20  get for the three years.

21           BOARD MEMBER SPERLING:  So that's the real -- you

22  know, we keep talking about these --

23           CHAIRPERSON NICHOLS:  It's the real number.

24           BOARD MEMBER SPERLING:  This is the real number

25  of vehicles, would be -- in this case it would be 2500

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 1  fuel cells.  It would actually be -- in terms of battery

 2  EVs, that would be a little over 4,000 battery EVs.  So it

 3  would be 2500 fuel cells or 4,000 battery EVs --

 4           CHAIRPERSON NICHOLS:  -- or a combination of the

 5  two.

 6           BOARD MEMBER SPERLING:  -- or a combination of

 7  the two.  And ending up with a total of about 75,000

 8  vehicles.  And as you see there, the staff estimates that

 9  the cost would be 875 million.

10           If we pushed it up to 5,000 -- if we pushed the

11  gold number up to 5,000 -- so that's 5,000 fuel cells or

12  about 8,000 battery EVs, and then the rest being

13  plug-ins -- there would be a total of about 67,000

14  vehicles.  And that would add another $180 million.

15           Another proposal, which is what I would like to

16  put forth here, would be to put the -- create a target

17  where the fuel cell vehicle -- where the plug-in hybrid

18  vehicles get a little more credit for what we've been

19  talking about for the Volt-type vehicle, extended range

20  vehicle.  And there would be a couple more credits for the

21  fuel cells as well.  And that would end up with either

22  5300 fuel cells or about 11,000 of the standard battery

23  EVs, total of about 60,000 vehicles.  And that would

24  actually add less money.  It would only be 147 more than

25  the 875.

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 1           And the next number, which is what was just

 2  proposed here by Member D'Adamo, and that would be

 3  10,000 -- in that case it would be 10,000 fuel cell

 4  vehicles.  But if you gave the extra credits for the fuel

 5  cells, the actual fuel cell credit number would be 7,000,

 6  7100 plus -- excuse me -- or -- this is the simple

 7  version, by the way -- or about 14,000 -- 13 to 14,000

 8  battery EVs, with a total of 50,000.

 9           So, you know, this -- so that third line there is

10  actually what I would propose.  And that represents a huge

11  increase beyond what, you know, the staff was proposing.

12  It's a lot of vehicles.  You know, some might say it's a

13  lot, some might say it's a little.

14           CHAIRPERSON NICHOLS:  But those are real

15  vehicles.  That's not credits.  That's not things in the

16  bank, right?

17           BOARD MEMBER SPERLING:  Those are real vehicles.

18           And, you know, I would add the observation that

19  this really is pushing the envelope.  You know, I've spent

20  a lot of time studying, you know, these vehicle

21  technologies and, you know, working these numbers both in

22  an academic sense as well as with the industry.  This is

23  going to be tough.  And I don't think -- you know, I know

24  lots of people would like to see a lot more vehicles.  But

25  we're really talking about, you know, a transition period

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 1  here.  And as I suggested before, when we get to 2015, we

 2  can have a dramatic ramp-up.  But the reality is that in

 3  battery EVs the market is still very uncertain.  The

 4  battery technology, you know, is just about here but not

 5  quite here.  The market is very uncertain, how many city

 6  EVs, you know, market is there really?  How many people

 7  are really going to be willing to buy those?  The fuel

 8  cell vehicles still need technological development.

 9           So I would suggest this is the outer reach of

10  what is responsible.  Not to say your proposal is not

11  responsible.  But, you know, so that's -- I mean we can

12  talk about these numbers more.  But that's what I would

13  propose.

14           CHAIRPERSON NICHOLS:  That's in terms of people

15  who are playing the numbers game as far as, you know, our

16  commitment to this program, the target number that you're

17  talking about in the pure gold category -- I guess what we

18  would define as pure gold -- would be triple --

19           BOARD MEMBER SPERLING:  Right.

20           CHAIRPERSON NICHOLS:  -- what it was under the

21  staff proposal, which I suspect is going to make the staff

22  queasy.  But --

23           BOARD MEMBER SPERLING:  Never mind a few

24  companies.

25           CHAIRPERSON NICHOLS:  Yeah,  Well, and not to

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 1  mention the regulated community, right.

 2           But, you know, one of the questions is really

 3  those cost numbers.  I heard some criticism of whether our

 4  baseline cost numbers were realistic or were really too

 5  high.  And we haven't focused on that in the course of

 6  this hearing.  I suppose that's one element of skepticism

 7  about, you know, whether we were being aggressive enough.

 8  I certainly -- I should just say I was concerned that

 9  maybe we were potentially overestimating the cost.  So I

10  don't want to put out hard numbers on any of these items.

11           BOARD MEMBER SPERLING:  Right.  Yeah, I would

12  say -- I believe the numbers are significantly less than

13  that, partly also because we've -- there's been a lot of

14  the learning over the last couple of years before those

15  estimates were made, and I think that also these don't

16  reflect scale and learning improvements because we're just

17  kind of extrapolating out these numbers.  And so as you

18  get, you know, beyond a thousand or 2,000 or 3,000, the

19  cost per vehicle would be coming down.  And these

20  estimates don't reflect that.

21           CHAIRPERSON NICHOLS:  Could I just pursue that

22  for a second, because I heard during the course of

23  conversations with both environmental groups and

24  industries sort of different -- very different statements

25  about when costs actually start to come down.  Certainly

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 1  it's not when you're building more demonstration vehicles

 2  or more prototype vehicles, because there's no economy of

 3  scale there at all.  But in the production process how

 4  many it really takes before you start to see some

 5  improvements.  Do you have a comment on that?

 6           BOARD MEMBER SPERLING:  I'll take a first cut at

 7  it.  And, that is, that, you know, industry -- you know,

 8  when they go into some sort of serial production and

 9  that's, you know, in the thousands per year, the costs

10  come down -- start coming down considerably.  And I think

11  that's where we are.  You know, with these gold vehicles,

12  not so much.  But definitely with the plug-in vehicles,

13  that would definitely be the case.  And much of that cost

14  is from the plug-in vehicles.

15           I don't know, maybe Tom Cackette would know what

16  proportion.  But a big proportion of it is plug-ins, not

17  the gold vehicles.

18           CHAIRPERSON NICHOLS:  Do you have an answer on

19  that?

20           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

21  CHIEF BEVAN:  Depending on which compliance scenario we're

22  talking about, whether it's fuel cells or battery electric

23  vehicles, yeah, the number of plug-in vehicles, it's sort

24  of a -- let me check real quick.

25           CHAIRPERSON NICHOLS:  Got to get back to the

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 1  computer here.

 2           BOARD MEMBER SPERLING:  But these are very

 3  difficult numbers to pin down in any case.

 4           CHAIRPERSON NICHOLS:  Of course.  Well, it's a

 5  very competitive market out there.  These companies are

 6  not all the same.  They don't have the same research, the

 7  same product mix, the same -- I mean we understand that

 8  it's going to be a range and it's going to be much tougher

 9  for some than for others.

10           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  If you

11  look at the first line, you can see there's 30 times more

12  vehicles at silver plus than the others.  So that tells

13  you why that one I think tends to --

14           SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH

15  CHIEF BEVAN:  They're in the same order of magnitude, the

16  plug-in hybrids and the fuel cell vehicles.  The plug-in

17  hybrids do outweigh the fuel cell vehicle expenses in

18  staff's proposal, and even at, say, the 5,000 floor.

19           CHAIRPERSON NICHOLS:  Dr. Baums.

20           BOARD MEMBER BAUMS:  Yes.  Well, as the new kid

21  on the block, I'd like a little clarification.

22           Given the gravity of the health concerns and the

23  climate concerns, not to mention dependence on oil, I am

24  concerned about sending a signal that -- even though both

25  Dede's and Dan's proposal, I understand the merit of, and

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 1  I'm not saying I'm against either one at this point, but I

 2  was impressed that we'd be sending a signal if we move

 3  away from the current standard.  And so I think it's

 4  important for me to understand why either one of these

 5  proposals is better than just keeping things the way they

 6  are, given that we're going to review the whole program in

 7  a year.  Because -- you know, I'd definitely second all

 8  the people that have said we need to simplify the program,

 9  because as somebody trying to get their arms around this

10  program, it's very difficult.  And, you know, so I am

11  worried about the signal that we send.  Even if this makes

12  sense to us and to staff, is it going to make sense

13  outside of this room, except to a select group?

14           CHAIRPERSON NICHOLS:  I think that's a very valid

15  question, a very valid concern.  I guess in my own mind

16  what convinced me that we needed to do something today as

17  opposed to waiting was the fact that I was told by staff

18  that companies had been waiting since earlier this year,

19  and maybe before, making decisions about investments that

20  they're making now for their plans for the 2012 to 2014

21  timeframe, that they actually do have to make decisions

22  this far in advance, and that some of those decisions

23  could pretty drastically affect what would be offered for

24  sale in California as well as what they would be putting

25  money into in their research and development -- in their

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 1  current development programs.  I mean every one of them is

 2  looking at a future in which they've got to make a

 3  transition.  But the question is, what do they do in the

 4  near term to stay within our guidelines and still keep

 5  doing business?  And so in that sense I would invite

 6  comment here.  But that seemed to be the principle reason

 7  why we needed to say something today, not only about where

 8  we're headed long term, but specifically about, you know,

 9  what we want them to be banking on right now.

10           BOARD MEMBER SPERLING:  There is one other

11  important procedural reason and, that is, the blended

12  plug-in hybrids were not taken care of before.  And so if

13  we left it alone, there'd be no credit at all for any of

14  the blended plug-in hybrids.  And so we have to fix --

15  that's probably the biggest thing we have to fix.

16           BOARD MEMBER D'ADAMO:  And BEVs.  One's a fuel

17  cell strategy that clearly is not sustainable and the

18  other is sort of a mix:  BEVs, fuel cell, plug-ins.

19           CHAIRPERSON NICHOLS:  Yeah, the big bet on the

20  fuel cells obviously didn't pan out.  And we have to cope

21  with that.

22           BOARD MEMBER RIORDAN:  Madam Chair, just a quick

23  question to the staff.

24           The proposal by Dr. Sperling at this point in

25  time -- and I know I'm putting you in a very difficult

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 1  position -- but are you comfortable with that given his

 2  research?  I don't know whether you have had benefit of

 3  his research.  And I think sometimes it's good to have

 4  somebody who's spent a great deal of time looking at it

 5  from kind of an outside perspective.  But I just feel I

 6  need to ask you how you feel, because you're going to have

 7  to implement it.

 8           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Well, I

 9  think there's a balance here.  And the Board is equally

10  capable of deciding that balance point as the staff is.

11  And, that is, the need for forward progress versus the

12  need to spend -- to not spend money that may not be the

13  best use of that money.  And so we tended to go for the

14  lower number of gold vehicles because we weren't sure that

15  the extra expenditure of money really moved development

16  and solution of problems that, in fact, fuel cells

17  vehicles have.  Like they're not fully durable for the

18  lifetime of the vehicle yet, and cost reduction.  We

19  didn't think it was necessarily the best expenditure to go

20  higher.

21           But on the other hand, you know, we've got to

22  build infrastructure, we've got to show a positive upward

23  inclination for investors in this area.  And if the

24  numbers aren't going up, we're not going to ever to get to

25  the giant numbers that we ultimately need.

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 1           So it was a balance there, and I don't know where

 2  the right point is.  We thought it was at the 2500.  I

 3  think numbers that are, you know, 10,000 or above are

 4  probably getting pretty big.

 5           I want do make one clarification on the table

 6  too, which I didn't realize until the moment.  But the

 7  number of vehicles are for the three-year period.  The

 8  dollars are per year.

 9           CHAIRPERSON NICHOLS:  These are per year.

10           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Yeah.

11  But for the three-year window we're talking about, the

12  numbers are actually three times higher here, and I --

13           CHAIRPERSON NICHOLS:  Okay.  So that's a

14  significant --

15           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:

16           -- forgot to say that or recognize that.

17           CHAIRPERSON NICHOLS:  Well, you know, I have to

18  say that, put that way, that kind of seals me in the

19  direction that we're right to be moving forward to

20  increase these numbers dramatically.  Because, you know,

21  the companies have been clinging to the past for a long

22  time, and it's time to be moving on.  And I think pushing

23  them to make a bigger investment than they chose or wanted

24  to do is the right thing to be doing at this stage of the

25  game.

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 1           BOARD MEMBER HILL:  That's the way we'll drive

 2  that technology.

 3           CHAIRPERSON NICHOLS:  But as between the two

 4  proposals, I guess I'd have to say that, although my heart

 5  is in the direction of just raising the number to the

 6  higher level, that I feel like I need to really

 7  acknowledge that I'm not the biggest expert on the

 8  technology and I'd be inclined to back the proposal that

 9  Professor Sperling has put before us as an alternative.

10  If we could get that on the table, I would do that.

11           BOARD MEMBER D'ADAMO:  You know, I'd actually be

12  prepared to amend my motion, because I do think

13  Dr. Sperling has spent a lot more time and he knows the

14  detail much better than I do.  I just really felt it was

15  important to put out a target -- a high target and then

16  have a discussion.

17           CHAIRPERSON NICHOLS:  Okay.  So you would amend

18  your motion to basically include his table there?

19           BOARD MEMBER D'ADAMO:  Right.

20           CHAIRPERSON NICHOLS:  All right.  Do we have a

21  second for that?

22           BOARD MEMBER HILL:  I will amend my -- I will

23  also --

24           CHAIRPERSON NICHOLS:  All right.  And that would

25  be the seconder.  Good.

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 1           Okay.  Further discussion?

 2           EXECUTIVE OFFICER GOLDSTENE:  Madam Chair, we

 3  want to clarify, it's the bottom line, the 7 --

 4           CHAIRPERSON NICHOLS:  No, it's the middle.

 5           BOARD MEMBER RIORDAN:  The 5357.

 6           CHAIRPERSON NICHOLS:  Yeah.

 7           BOARD MEMBER SPERLING:  It's really -- I mean in

 8  terms of the way it's crafted, it's 7500 is the real

 9  number -- I mean is the -- what is real?

10           EXECUTIVE OFFICER GOLDSTENE:  We understand, a --

11           CHAIRPERSON NICHOLS:  What is "is," right?

12           Just make it 7500 and then put some footnote --

13           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  The

14  next line Dr. Sperling tells us to simplify the

15  regulation, I'll remember this moment.

16           CHAIRPERSON NICHOLS:  Fair enough.

17           All right.  Ms. Berg.

18           BOARD MEMBER BERG:  I have a point of

19  clarification.

20           In looking at the current increase and also

21  increasing the credits for the fuel cell, then what impact

22  will that have on the BEVs, if any?  Because what we've

23  been hearing today is so much a tug of war between, you

24  know, favoring a technology.  And I, like the Chair, would

25  really like to think that we are approaching this from a

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 1  technology neutral, supporting what -- you know, the

 2  entrepreneurship and the consumers and pushing it forward.

 3  So I just get a little bit nervous when it looks like we

 4  might be again favoring one technology over another.

 5           BOARD MEMBER SPERLING:  Let me give you a simple

 6  answer, if I can do such a thing.  Give it a try.

 7           I think what we're doing is raising everything in

 8  the gold category forward in lock step.  So we're

 9  basically tripling and then we're making -- but we're

10  making two adjustments.  One is -- it doesn't show up in

11  that, but it's part of the resolution, is to provide

12  another category of plug-in hybrids.  And so that there

13  would be more credits potentially for a plug-in hybrid,

14  you know, the one that meets the US 06 drive cycle.  And

15  at the same time we also provide another category of fuel

16  cells for also another high performing category.  And that

17  would get two extra credits.  We haven't specified how

18  many extra credits for the plug-in.  You know, it's 2. --

19  somewhere between 2.4 and 3.0.  I guess I might even

20  subject 2.7, you know, split the difference.  We're being

21  very scientific here.

22           So that's what we're -- but we're being -- at

23  least in terms of the proposal we're being fuel technology

24  neutral even though -- of course nothing is completely

25  neutral.

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 1           CHAIRPERSON NICHOLS:  And we are creating an --

 2  we're creating an incentive for better batteries and

 3  better fuel cells.

 4           BOARD MEMBER SPERLING:  Right.  Because we're

 5  tripling the number of battery EVs and, you know, tripling

 6  the number of fuel cells, unless you do -- if you do a

 7  better fuel cell, you do a little less.  If you do a

 8  better plug-in, you do a little less.  But you triple the

 9  number of battery EVs.

10           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  The

11  battery number for line three I think is around 12,500 if

12  you did hundred mile battery vehicles.

13           CHAIRPERSON NICHOLS:  I think it has to be

14  acknowledged that we're recognizing the fact that the fuel

15  cells have farther to go in the development process.  So

16  we are giving --

17           BOARD MEMBER BERG:  And that is part of the

18  regulation.  We understand that in that technology

19  forcing.  I'm not disagreeing with that.  But I appreciate

20  your explanation and I understand that.  Thank you.

21           CHAIRPERSON NICHOLS:  Other questions, comments

22  before I call for a vote on this item?

23           BOARD MEMBER BERG:  Are we going to vote for one

24  item at a time or are we going to not discuss anything

25  about the travel or the --

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 1           CHAIRPERSON NICHOLS:  Ah, sorry.  I was just

 2  going for the number.  We might as well deal with the

 3  other amendments that were proposed at the same time and

 4  do it all at once if we can.

 5           BOARD MEMBER D'ADAMO:  Well, I would like to --

 6  I'm not sure -- procedurally I guess amend the main

 7  motion.

 8           CHAIRPERSON NICHOLS:  You have a main motion on

 9  the floor.  I think you can --

10           BOARD MEMBER D'ADAMO:  Right, I would make a

11  motion to include in the proposal that we go back to

12  current regulation with respect to intermediate volume

13  manufacturers.

14           CHAIRPERSON NICHOLS:  That's accepted by your

15  seconder.

16           BOARD MEMBER HILL:  Yeah.

17           CHAIRPERSON NICHOLS:  Good.  Okay, so we're

18  adding that.

19           And I'd like to add a provision that we're going

20  to alter the staff proposal on transparency of the credits

21  to include trades within that as well.

22           And were there other changes that other -- I

23  think we're going to leave the -- I will accept the staff

24  recommendation as modified by New York for the travel

25  provision.

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 1           BOARD MEMBER BERG:  And I just want to make sure,

 2  on the intermediate then, would that change the hydrogen

 3  program for BMW?  Does that allow them to continue their

 4  hydrogen program?

 5           Staff.

 6           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Well, I

 7  don't know what they'll do.  But they testified that it

 8  would probably end that program because they would have to

 9  start a fuel cell program, because they're the only

10  intermediate volume manufacturer that I think doesn't

11  really have -- that's going to become big that doesn't

12  have a fuel cell program underway.

13           BOARD MEMBER BERG:  I just want do make sure that

14  that's not an unintended consequence.

15           CHAIRPERSON NICHOLS:  I think they've been

16  nurturing that program for a long time.  And maybe

17  they'll -- you know, they may have to cut it back some

18  because it just doesn't meet the needs of the times.

19           BOARD MEMBER SPERLING:  You know, I realize

20  there's one clarification -- in that proposal, when we

21  talked about another category of fuel cells, we didn't

22  specify what that was, I don't believe.  My intention was

23  it would be something -- it would be with a range of 300

24  miles, which would match what Honda says is their, you

25  know, latest generation state of the art.  And most of the

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 1  fuel cells are less than that.  So it's not clear how many

 2  of them would be able to achieve that.  But that would be

 3  the extra -- the higher category.

 4           CHAIRPERSON NICHOLS:  Any other clarifications,

 5  last minute issues that people have?

 6           If not, I will call the question.  And I guess we

 7  might as well make it a roll call vote.

 8           So the clerk will call the roll, please.

 9           SECRETARY ANDREONI:  Dr. Baums?

10           BOARD MEMBER BAUMS:  Yes.

11           SECRETARY ANDREONI:  Ms. Berg?

12           BOARD MEMBER BERG:  Yes.

13           SECRETARY ANDREONI:  Ms. D'Adamo?

14           BOARD MEMBER D'ADAMO:  Aye.

15           SECRETARY ANDREONI:  Supervisor Hill?

16           BOARD MEMBER HILL:  Yes.

17           SECRETARY ANDREONI:  Ms. Kennard?

18           Oh, wait.  She wasn't here.  Sorry.

19           Mayor Loveridge?

20           Oh, he left?  Okay.

21           Mrs. Riordan?

22           BOARD MEMBER RIORDAN:  Aye.

23           SECRETARY ANDREONI:  Professor Sperling?

24           BOARD MEMBER SPERLING:  Yes.

25           SECRETARY ANDREONI:  And Chairman Nichols?

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 1           CHAIRPERSON NICHOLS:  Yes.

 2           SECRETARY ANDREONI:  Motion passes.

 3           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  On my

 4  list there was one -- we weren't certain if you included

 5  in that the Mitsubishi issue about the gold credits.

 6  And --

 7           CHAIRPERSON NICHOLS:  I think we asked you to

 8  look at that in the context of the future.

 9           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  That

10  15-day?

11           CHAIRPERSON NICHOLS:  Fifteen-day, yes.

12           BOARD MEMBER HILL:  As well as that loophole

13  question too.

14           CHAIRPERSON NICHOLS:  Yes, that was on the list

15  for the 15-day.

16           All right.

17           BOARD MEMBER BAUMS:  And energy versus range

18  also.

19           CHAIRPERSON NICHOLS:  Yes, and -- well, that's

20  really kind of for the long -- I think for more than 15

21  days.  That's part of the major revision.

22           I really want to thank everyone who participated

23  in the hearing.  It's been at a very high level.  And we

24  appreciate all of your input and all of your

25  thoughtfulness and care for this program.

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 1           We're going to take a minute or two -- maybe a

 2  ten-minute break just to give ourselves a stretch.  And

 3  then we'll come back, and we have a couple other items to

 4  deal with.

 5           Thank you.

 6           (Thereupon a recess was taken.)

 7           CHAIRPERSON NICHOLS:  Ladies and gentlemen?

 8           Excuse me, ladies and gentlemen.  We have two

 9  other items before the Board.  We also have the staff

10  actually writing up the resolution, because I think

11  there's a fair amount of confusion out there about what

12  was actually adopted.  And rather than to continue to try

13  to explain it -- I thought I had it on -- I'd like to have

14  those of you who care about this item stick around and

15  wait to actually see the resolution so we can clarify it

16  for you in writing.

17           CHIEF COUNSEL JENNE:  Chairman Nichols, we just

18  talked about that a few minutes ago.  I think it might be

19  difficult to get all the nuances in the resolution.  But

20  what we could do is just put kind of together a plain

21  English statement of what occurred so people can have, and

22  then leave the final resolution until later.

23           CHAIRPERSON NICHOLS:  That's fine.  That will

24  work.  That's fine.  That's what we need is the plain

25  English version.

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 1           Thanks.

 2           You know, we worked our way through a lot of

 3  material there, and I think it's going to take people some

 4  time to digest it.  But from a policy perspective --

 5           EXECUTIVE OFFICER GOLDSTENE:  Madam Chairman,

 6  staff is working on a write-up.

 7           CHAIRPERSON NICHOLS:  -- I think it was a good

 8  process.  And I think where we ended up is in a place that

 9  we're all going to look back on and think move the ball

10  considerably forward.

11           Okay.  So the next item is the Proposed Revisions

12  to the Lower Emission School Bus Program Guidelines,

13  including allocations of funding.

14           It's not?

15           EXECUTIVE OFFICER GOLDSTENE:  No, this is Moyer.

16           CHAIRPERSON NICHOLS:  Oh, it's Moyer first.

17  Sorry.

18           Okay.  Well, let's see.

19           Here we are.  Right you are.

20           Item 08-3-3, Proposed Revisions to the Carl Moyer

21  Program Guidelines.  Thank you.

22           For the past ten years the Carl Moyer Program has

23  provided financial incentives to individuals to

24  voluntarily purchase cleaner engines and technologies.

25  This incentive program complements California's regulatory

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 1  program by funding emissions reductions that are early or

 2  are in excess of what's required by regulation.

 3           The Carl Moyer Program has been very successful,

 4  with the demand for funding typically outstripping

 5  available funds in spite of a large expansion in funding

 6  in recent years.  About 7500 engines have been cleaned up

 7  throughout California during the first seven years of the

 8  program, reducing smog-forming emissions by about 24 tons

 9  per day and diesel particulate emissions by about 1 ton

10  per day.

11           The Carl Moyer Program Guidelines define basic

12  implementation requirements to ensure that public funds

13  are spent wisely on real, enforceable, and cost effective

14  projects that can be credited in our state implementation

15  plans.  The guidelines also include administrative

16  procedures to ensure program transparency and

17  accountability.

18           These guidelines need to be revised periodically

19  to keep pace with technological, regulatory, and policy

20  changes and to benefit from the experience that ARB and

21  the local air districts have accumulated in overseeing and

22  implementing the Carl Moyer Program.

23           Mr. Goldstene, will you please introduce the item

24  and begin the staff presentation.

25           EXECUTIVE OFFICER GOLDSTENE:  Thank you, Chairman

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 1  Nichols, members of the Board.

 2           As you mentioned, for more than ten years the

 3  Carl Moyer Program has successfully accelerated the

 4  voluntary turnover of old, higher polluting engines and

 5  achieved much-needed surplus emission reduction.  The Carl

 6  Moyer Program has served as a model in the design of other

 7  incentive programs, most notably the ARB's Goods Moment

 8  Emission Reduction Program, the one billion dollar program

 9  for which the Board approved implementation guidelines

10  last month.

11           Along with the need to update the Carl Moyer

12  Program Guidelines to keep them current and relevant, the

13  proposed guidelines reflect the need to remain responsive

14  to new challenges.  Some of the challenges staff faced in

15  preparing the proposed guidelines involved balancing

16  conflicting goals; for example, balancing the desire for

17  more program simplicity with the need for more

18  accountability and oversight.  Another challenge involved

19  identifying additional possibilities for achieving surplus

20  emission reductions in the face of new regulations that

21  decrease the opportunities for such reductions.  Of

22  special note is the proposed new off-road equipment

23  replacement category that expands opportunities for

24  funding cleaner off-road equipment.

25           Staff also took on the challenge of coordinating

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 1  the Carl Moyer Program with the Goods Movement Emission

 2  Reduction program to make sure that these two incentive

 3  programs make the best use of public funds and do not

 4  compete with each other.

 5           Staff worked in close cooperation with the local

 6  air districts in developing the proposed guidelines,

 7  receiving useful input during three public workshops and

 8  numerous work group meetings that focused on specific

 9  guideline areas.  Staff also received valuable input on

10  key policy issues from an advisory group convened for that

11  purpose.  And of course I'd like to extend my appreciation

12  to Board Member Sandra Berg for her leadership of that

13  group.

14           I'd like now to turn the presentation over to Mr.

15  Joe Calavita of the Mobile Source Control Division, who

16  will go over the proposal in more detail.

17           AIR POLLUTION SPECIALIST CALAVITA:  Good

18  afternoon, Chairman Nichols and members of the Board.

19           This presentation will provide an overview of the

20  proposed 2008 Carl Moyer Program Guideline revisions.

21  I'll start by providing some brief background on the Carl

22  Moyer Program before highlighting the key issues related

23  to these guideline revisions.

24                            --o0o--

25           AIR POLLUTION SPECIALIST CALAVITA:  Since 1998,

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 1  the Carl Moyer Program has filled a critical niche in

 2  California's strategies TO achieve clean air.  The program

 3  provides grant funding to encourage the voluntary purchase

 4  of cleaner-than-required engines, equipment and

 5  technologies.  The program's statutory incremental cost

 6  requirement ensures applicants literally buy into the

 7  program, and the cost effectiveness limit ensures projects

 8  achieve a certain bang for the buck.

 9           Moyer is implemented as a partnership between the

10  Air Resource Board and the local air districts.  ARB

11  develops and adopts guidelines which, along with state

12  law, define the minimum program requirements.  And ARB

13  allocates state program funding to local air districts.

14  Air districts implement the program on the ground,

15  evaluating and selecting projects and contracting with

16  vehicle and equipment owners.  Air districts retain the

17  flexibility to adopt requirements that are more stringent

18  than those identified in the Moyer guidelines.

19                            --o0o--

20           AIR POLLUTION SPECIALIST CALAVITA:  The Carl

21  Moyer Program has been highly successful, achieving

22  significant air quality benefits in its first seven years,

23  and has proven extremely cost effective at about $3,000

24  per ton of NOx reduced.

25                            --o0o--

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 1           AIR POLLUTION SPECIALIST CALAVITA:  As you can

 2  see, legislation in 2004 significantly boosted available

 3  funding for the Carl Moyer Program.  Districts are now

 4  receiving their year ten funds from ARB, and with these

 5  funds ARB will have distributed a total of more than $400

 6  million in Carl Moyer Program funds to air districts.

 7                            --o0o--

 8           AIR POLLUTION SPECIALIST CALAVITA:  With multiple

 9  years of Moyer implementation under our belts, we know the

10  importance of modifying the Moyer guidelines as necessary

11  to adjust for regulatory changes and to continue to

12  improve the program.  As such, I'll now describe the

13  guideline revisions before you today.

14           This slide outlines our goals for the 2008 Carl

15  Moyer Program Guideline revisions.  I'll touch on these

16  goals in summarizing the proposed guidelines in the slides

17  ahead.

18                            --o0o--

19           AIR POLLUTION SPECIALIST CALAVITA:  One of the

20  comments we heard from air district and applicants is that

21  they'd like more flexibility in program implementation.

22  At the same time, the California Department of Finance and

23  Bureau of State Audits recent Carl Moyer Program

24  evaluations included recommendations for more program

25  specificity and oversight.

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 1           Our goal, therefore, has been to strike a balance

 2  between streamlining the program's administrative

 3  requirements and addressing did DOF's and BSA's

 4  recommendations.

 5                            --o0o--

 6           AIR POLLUTION SPECIALIST CALAVITA:  We held 13

 7  Program Administration Work Group meetings with air

 8  district staff to strike this balance between program

 9  flexibility and more specifics and oversight.  This slide

10  highlights some of the issues addressed through this admin

11  work group.

12           In addition to the changes listed here, we're

13  also proposing to update the Moyer guidelines every four

14  years rather than every two to three years, to make the

15  program more predictable and easy to implement.

16           We're also continually striving during

17  development of new rules to provide user-friendly analyses

18  of how rule adoption would impact Moyer funding

19  eligibility.  These analyses are typically included in

20  proposed rule staff reports.  Our goal is to make this

21  discussion as clear and frank as possible up front so the

22  implications of each new rule on Moyer funding

23  opportunities can be fully vetted.

24           And, finally, to ensure accountability, these

25  guidelines commit ARB to conduct regular audits of air

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 1  districts Moyer programs.  ARB plans to audit enough

 2  districts to have reviewed at least ten percent of annual

 3  program funds each year.

 4                            --o0o--

 5           AIR POLLUTION SPECIALIST CALAVITA:  To reflect

 6  the impact of inflation, we're also proposing to increase

 7  the program's cost-effectiveness cap from $14,300 to

 8  $16,000 per weighted ton.

 9           And we now have enough data from the program's

10  first seven years to calculate an average incremental cost

11  as a percentage of total project cost.  We're proposing

12  project incremental cost, or the applicant cost share, to

13  be based on this historical percentage instead of a dollar

14  value.  This approach simplifies program implementation

15  and provides an added incentive for an applicant to shop

16  for the best deal.

17                            --o0o--

18           AIR POLLUTION SPECIALIST CALAVITA:  We're also

19  exciting to be proposing a new off-road equipment

20  replacement category for the Carl Moyer Program.  This

21  program would allow for the accelerated replacement of an

22  older piece of equipment with new equipment.  This program

23  would be particularly useful for projects for which a

24  repower is infeasible or impractical.  The project

25  criteria we're proposing are intended to ensure grants

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 1  accelerate replacement of old equipment with new, cleaner

 2  equipment and to assure we're not paying for equipment

 3  replacement that was going to occur anyway.

 4           This program also addresses the requirement of SB

 5  467, which directs ARB to develop a program that funds

 6  replacement of internal combustion equipment with electric

 7  equipment that can do the same job.

 8                            --o0o--

 9           AIR POLLUTION SPECIALIST CALAVITA:  This slide

10  highlights some of the specific elements of the equipment

11  replacement program.  Like the on-road fleet modernization

12  program, districts would submit a program implementation

13  plan to ARB for approval prior to funding projects.

14           The resolution in front of you today also

15  authorizes and directs the ARB Executive Officer to

16  evaluate updated agricultural equipment fleet turnover

17  data within one year and, if warranted by the data, update

18  the maximum project life for ag equipment.

19                            --o0o--

20           AIR POLLUTION SPECIALIST CALAVITA:  This past

21  December and January, we also held two Carl Moyer Program

22  advisory group meetings, which we were privileged to have

23  led by Board Member Sandra Berg.  The advisory group was

24  informal and open the all interested stakeholders.

25           These first two advisory group meetings focused

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 1  on policy issues related to these proposed Moyer

 2  guidelines.  However, we're very excited that Board Member

 3  Berg has offered to continue leading this group focused on

 4  emerging policy issues related to Moyer and our other

 5  incentive programs.

 6                            --o0o--

 7           AIR POLLUTION SPECIALIST CALAVITA:  This slide

 8  identifies the four issues discussed at our two Moyer

 9  advisory group meetings.  For the first issue, program

10  complexity, we summarized for the advisory group the steps

11  taken to streamline program implementation.

12           The advisory group also discussed the Carl Moyer

13  Program's existing minimum project life, which is three

14  years, except for stationary ag engines, for which it is

15  one year.

16           Some stakeholders commented that we should

17  shorten project life for all source categories to one

18  year.  However, a shorter project life would reduce the

19  cost effectiveness of the Carl Moyer Program and could

20  result in paying for regulatory compliance.  We're

21  therefore not recommending a change to minimum project

22  life with these guidelines.

23           Our recommendations regarding the retrofit

24  requirement and coordination with the Proposition 1B Goods

25  Movement Emission Reduction Bond Program are summarized on

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 1  the following slides.

 2                            --o0o--

 3           AIR POLLUTION SPECIALIST CALAVITA:  The existing

 4  Moyer guidelines require that for all off-road repower

 5  projects, a retrofit device must also be installed if one

 6  is verified for the project engine.  Districts have

 7  commented that they would like the flexibility to pursue

 8  the most cost-effective projects, which may or may not

 9  include installation of a retrofit.  Districts and some

10  applicants have also expressed concern that requiring

11  retrofits as the off-road retrofit market is developing

12  can be an administrative burden.

13           ARB remains committed to an aggressive retrofit

14  program.  We're proposing today limited flexibility in

15  implementing the retrofit requirement for Moyer off-road

16  projects.  Districts would have to offer a retrofit as

17  part of off-road projects.  Applicants may decline the

18  retrofit, but must be informed that they may have to pay

19  for one in the future due to ARB's off-road rule adopted

20  last year.  This flexibility would expire after one year

21  unless renewed by the Executive Officer.  As indicated on

22  this slide, we believe the off-road rule will continue to

23  drive demand for retrofit projects.

24           Moyer staff has also worked closely with staff

25  from the Proposition 1B Bond Program to ensure the

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 1  programs are complementary and maximize the effectiveness

 2  of our state incentive funds.  The guideline revisions

 3  clearly delineate what's eligible for Moyer, what's

 4  eligible for the bond and, where it makes sense, what

 5  projects should be eligible for either program.  Our

 6  approach has been to direct bond-eligible projects to the

 7  bond in source categories where the bond has significantly

 8  more funds to expend.

 9           We've also aligned the Moyer funding limits for

10  some of the project types to deter applicants from

11  favoring one program over the other.  I'll discuss these

12  issues further on the following two slides.

13                            --o0o--

14           AIR POLLUTION SPECIALIST CALAVITA:  This slide

15  indicates what projects would be directed to the Bond

16  Program versus Moyer.  The Carl Moyer Program also funds

17  ag pumps, farming construction equipment, cap scrap and

18  other categories not eligible for goods movement bond

19  funding.

20           In general, port trucks, Class One freight

21  locomotives, and shore power for cargo berths, which are

22  targeted to receive significant bond funds, would be

23  restricted from receiving Moyer funds.

24           We're recommending that these categories only be

25  eligible for Moyer funding if bond funds are unavailable.

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 1  This strategy is to help ensure timely expenditure of the

 2  much larger pot of available bond funds.

 3           At this point I'd like to note that we've

 4  provided in the Board's information packet a strikeout

 5  underlined document detailing staff's proposed

 6  modifications to these guideline revisions.  These are

 7  also available for the public on the table in the lobby

 8  and on our website.  These modifications are based on

 9  comments we received during the 45-day public comment

10  period.  In this document we're proposing additional

11  flexibility to fund freight locomotives with Moyer funds

12  if bond funds are unavailable.

13                            --o0o--

14           AIR POLLUTION SPECIALIST CALAVITA:  As mentioned

15  earlier, we're also proposing to align maximum eligible

16  funding for some source categories with that allowed by

17  the bond - typically 50 percent.  We're not proposing to

18  align other project requirements, such as percent

19  operation in California, with the bond at this time.

20           We believe these strategies to align Moyer with

21  the bond are critical to ensure the effective

22  implementation of both programs, particularly since bond

23  program legislation requires unspent funds and funds under

24  contract which fall through must be returned to the

25  Legislature for reappropriation.

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 1           The strikeout underlined document I just

 2  mentioned also includes modified language for the funding

 3  of truck fleet modernization projects.  Some stakeholders

 4  have indicated that grants for only half the cast of a

 5  truck would limit the ability for owner-operators to

 6  participate in the program, and therefore allowable

 7  funding should remain 80 percent as it is in the current

 8  Moyer guidelines.  We've heard these concerns and are

 9  recommending that, if cost effective, owner-operators be

10  eligible to receive up to 80 percent funding.  Maximum

11  allowable funding for larger fleets would remain

12  50 percent.

13           Finally, a brief look ahead.  Part of the Carl

14  Moyer Program's success has been in its ability to evolve

15  to meet new challenges.  In the years ahead it will be

16  increasingly critical that we coordinate the Carl Moyer

17  Program with emerging grant programs to meet California's

18  diverse air quality goals.

19           New regulations for in-use engines are also

20  impacting Moyer eligibility for many source categories.

21  There are still opportunities for funding these

22  categories, but we must increasingly target early

23  reductions, reductions which go beyond regulatory

24  requirements and exempt sources such as small businesses.

25           We're also evaluating potential innovative new

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 1  approaches, such as vouchers to streamline the program or

 2  loans to help our state dollars go further.  And we

 3  continue to pursue new program opportunities such as the

 4  off-road equipment replacement program included in these

 5  guidelines.

 6           While the types of projects funded vary from year

 7  the year, demand for Carl Moyer Program funds continues to

 8  exceed available dollars.  Given the cost of cleaning up

 9  California's in-use diesel engine fleet, we expect this

10  demand to remain high for years to come.

11                            --o0o--

12           AIR POLLUTION SPECIALIST CALAVITA:  In

13  conclusion, staff has worked closely with districts and

14  other stakeholders to develop guidelines that are

15  flexibility, yet provide ample oversight, transparency,

16  and accountability.  These Carl Moyer program guidelines,

17  the fifth edition since the program's inception, ensure

18  the program's continued success in an evolving regulatory

19  and policy landscape and the continued ability of the

20  program to achieve surplus, cost effective and SIP

21  creditable emission reductions.

22           We recommend that you approve the proposed Carl

23  Moyer Program Guideline revisions as well as the minor

24  underline strikeout modifications provided by staff.

25           Thank you.

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 1           CHAIRPERSON NICHOLS:  Thank you.

 2           I'd like to ask Board Member Berg to lead off the

 3  discussion here and preside over this proceeding.

 4           BOARD MEMBER BERG:  Thank you, Chairwoman.

 5           First of all, I'd like to really thank staff.

 6  They have done just a yeoman's job on this.  And I'm very

 7  pleased with the revisions.

 8           I think as we move down to aggressively adopting

 9  rules, that the incentive funding is going to be an

10  important area, whether it's bond money or Carl Moyer

11  funds.  And how we continue to be very clear on how to

12  take advantage of these types of programs is going to be

13  critical to the success of these regulations.

14           So we're pleased to present these revisions.  And

15  great job, staff.  They're a delight to work with.

16           Oh, and I just might also say that I'm really

17  thankful for the participation.  We had two very lively

18  meetings and we had great representation between the

19  districts, the environmental and health groups, as well as

20  users of the program.  And it was very well set up.  It

21  was a lively discussion, and I think we were able to

22  really put a lot of issues on the table and resolve those

23  types of things.  And I was appreciative, Joe, of you

24  running the administrative group.

25           And so those types of things were set up.  I was

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 1  just at the right place at the right time to be able to

 2  walk in and chair the group, and I thank you for that.

 3           CHAIRPERSON NICHOLS:  Great.  Well, thank you.

 4           Given the hour, I'm not going to -- I mean I'm

 5  going to give everybody their three minutes.  But you will

 6  be appreciated if you take less than that.  And especially

 7  if you just want to say supportive things, that would --

 8  just be supportive briefly.

 9           All right.  We'll just go down in order.  Fred

10  Minassian, followed by Paul Buttner, and Allan Lind.

11           MR. MINASSIAN:  Chairman Nichols, members of the

12  Board, good afternoon.  My name is Fred Minassian.  I'm

13  the Manager of Incentive Programs at the South Coast AQMD.

14           My comments are related to the fleet

15  modernization segment of the guidelines.  We appreciate

16  the close cooperation we have had with ARB staff on

17  working on the new guidelines.  We have implemented the

18  fleet modernization program for the last year and a half

19  where we have replaced pre-1990 heavy-duty diesel trucks

20  with new trucks and provided funding equal to 80 percent

21  of the cost of a new truck or up to that amount.  The new

22  guidelines allow the continuation of that program.  And we

23  do support that.

24           However, it leaves another equipment category

25  that qualify for funding but is not included in the new

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 1  guidelines.  And that is the truck model years 1990 to

 2  1993.  According to ARB staff's own calculations and

 3  analysis, relative to Carl Moyer Program and all other

 4  rules and regulations, these vehicles qualify for funding

 5  under the fleet modernization program.  So there's no

 6  reason to leave them out.

 7           We are in a situation that the -- due to the

 8  complication of rules and regulations, it's becoming more

 9  and more difficult to find equipment categories under

10  Moyer.  So if there's a category that qualifies for

11  funding, it should be funded.

12           Again, based on ARB's evaluations, these qualify

13  for funding.  Within our own basin we have over 6,000

14  trucks model years 1990 through 1993 with emission

15  contribution equals to 10 percent of the total emission

16  inventory of heavy-duty trucks.  So we propose to include

17  funding of these trucks under the fleet modernization

18  program by providing up to only 50 percent of the cost of

19  a new truck and replace these trucks.

20           The Moyer program has been very effective.  We

21  evaluate every single truck based on their own operation

22  and merits, pre- and post-inspect every truck and crush

23  the old trucks.  And the emissions benefits are real and

24  quantifiable.  So there's no reason to leave them out.

25  And we ask your Board to include this -- to support the

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 1  inclusion of our proposal.

 2           Otherwise we do support the adoption of the

 3  program guidelines and we appreciate your cooperation --

 4  ARB staff cooperation with us.

 5           Thank you.

 6           CHAIRPERSON NICHOLS:  Thank you.

 7           Mr. Buttner.

 8           MR. BUTTNER:  Thank you.  I guess I get to be one

 9  of the first to say good evening, Madam Chair and members

10  of the Board.  I'll be very brief.

11           My name is Paul Buttner with the California Rice

12  Commission.  And I mostly want to thank staff for working

13  with us.  We have a concern that the five-year project

14  life for agricultural equipment is probably too low.  We

15  recognize that the staff really did a good job in trying

16  to find a lot of data that didn't exist to try to deal

17  with that.  And so we've committed to working with staff,

18  along with the equipment manufacturers, especially

19  California Farm Bureau Federation in cotton will join the

20  Rice Commission to try to get data that's needed to really

21  answer this question.

22           You have a letter before you that asks for a

23  particular addition to the resolution.  And I notice that

24  there's a line item in the resolution on page 6, it's the

25  second bullet on page six, and I believe it gets us right

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 1  where we need to be.

 2           So again I want to really thank staff for working

 3  with us and we continue to work with you over the next

 4  year.

 5           MR. LIND:  Thank you, Madam Chair.  My name is

 6  Allan Lind.  I'm here on behalf of the California Council

 7  for Environmental and Economic Balance.  And we are also

 8  here to support the Board's adoption of the Carl Moyer

 9  guideline regulations -- changes in the guidelines.

10           CCEEB was very pleased to be a part of the

11  advisory group that was chaired by Board Member Sandra

12  Berg.  And we strongly support the continuation of that

13  Board.  I agree with you that it was a lively discussion,

14  and I think it was very, very constructive.  And an

15  informal environment that I think perhaps some of your

16  other rule and guideline development processes could

17  benefit from.

18           We're hopeful that the continuation of the

19  advisory group will be able the touch on things like

20  refining the boundaries between some of the major

21  funding -- incentive funding sources that we have.  Not

22  only Carl Moyer, but of course Prop 1B and AB 118 and, for

23  that matter, significant sums of money that are available

24  in the districts themselves.

25           And we appreciated the efforts that went into

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 1  this guideline revision to look at it from the standpoint

 2  of streamlining the process to make it work better for the

 3  Board, for the districts, for the auditors and so forth.

 4  And we're looking forward to the next generation of effort

 5  that will streamline the process from the perspective of

 6  the applicants.  And so that was sort of a novel twist I

 7  think on the phraseology here.  But it really is -- and I

 8  know that Board Member Berg is going to be with us on this

 9  to look at it from the perspective of the users to make

10  this program as accessible and useful and approachable for

11  as many users as possible.

12           But the main thing is I think to look forward now

13  to what direction is the Carl Moyer Program going in.  And

14  is it in the right direction?  Does it need to stay right

15  where it is?  Or are we going to be morphing a little bit?

16  And I have a feeling that we are going to be morphing in

17  the future as regulations now become more and more

18  comprehensive with mobile sources.  We're going to have to

19  think of new ways and new approaches to making use of the

20  Carl Moyer Incentive Program.

21           The Board still has some unfinished business.

22  And CCEEB urges the Board to give consideration to

23  expanding the protocols that describe or facilitate the

24  ease at which new kinds of projects can be brought into

25  the system.  We want to be -- we want to reinforce what

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 1  you have already begun last year in the off-road rule by

 2  including appendix information about how the adoption of

 3  that regulation affects the use of incentive funding.  And

 4  we think that that really needs to be a very important

 5  part of the overall discussion of regulations,

 6  understanding where the boundaries are between the command

 7  and control regulation and the opportunities for financial

 8  incentives and how they work together and what makes the

 9  most sense.  So I think that's an important topic for the

10  advisory committee in into the future.

11           One of the suggestions that we'd like to make

12  that I think you can actually deal with today, that is not

13  a change in the regulations or your resolution

14  necessarily, but is to consider expanding the Carl Moyer

15  Program website to include information about what's going

16  on at the local level, to make it a bit of a clearing

17  house, so that we have an understanding or for -- the

18  public has an understanding of what's going on from

19  district to district in the implementation of the Carl

20  Moyer Program.

21           And then we thought that you might wish to give

22  consideration to annual performance goals for the Carl

23  Moyer Program.  What is it we're really trying to achieve?

24  Is it just getting the dollars out or the number of

25  projects?  It certainly has to be to clean the air, and

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 1  that should be our number one priority.

 2           And, frankly, now I'd like to also support the

 3  staff's remarks a few minutes ago about talking about

 4  looking at alternative funding mechanisms into the future,

 5  such as the voucher program and possibility of loans.  We

 6  think that those have some value and potential to expand

 7  the program in useful ways.

 8           And I think that's about all that I have to say.

 9  Thank you very much.

10           CHAIRPERSON NICHOLS:  Okay.  Thank you.  Your

11  time is up.  I haven't been strictly enforcing here.  I'm

12  sorry.

13           Okay.  William Davis, followed by Joe Wyman.

14

15           MR. DAVIS:  New sheriff in town, right?

16           CHAIRPERSON NICHOLS:  Right.

17           MR. DAVIS:  Hi.  My name is Bill Davis, Chairman

18  Nichols, members of the Board.  I'm the Executive Vice

19  President of the Southern California Contractors

20  Association and a member of the Board of Directors of the

21  Construction Industry Air Quality Coalition.

22           Our association members have repowered under the

23  Moyer program more than a thousand engines over the last

24  five years.  We've been very active participants in this

25  effort.  However, with the passage of the off-road diesel

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 1  regulation, about two-thirds of our members will no longer

 2  be able to access those funds.

 3           We have several suggestions to make some

 4  improvements in the staff recommended program.  The first

 5  is that we cannot support the amendment that equipment

 6  replacements must destroy the existing chassis.

 7  Destroying the engine may be sound to air policy.  But the

 8  chassis has no emission factors and it's value as parts

 9  and salvage far exceeds the cost -- will help reduce the

10  cost of the new replacement machines.  We recommend only

11  requiring the destruction of the engines and not the

12  entire replaced machine.

13           Second, the geographic constraints within the

14  Moyer program are a disincentive to participate.  Your

15  guidelines require that the equipment operate in the state

16  75 percent of the life of the contract.  And we think

17  that's fair enough.  The local districts, however, are

18  allowed to adopt their own requirements, and some require

19  that the equipment remain in the district 75 percent of

20  the time.  Contractors go from job to job.  In southern

21  California a contractor can be in as many as four to six

22  different air districts over a life of this contract.  So

23  many of them will not apply for this funding because they

24  can't meet the local district requirements.  We hope that

25  there's a more equitable criteria that can be used to

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 1  establish district residency issues.

 2           Third, we believe the program should allow the

 3  flexibility to install on-road engines in off-road

 4  equipment.  The off-road rule that you recently adopted

 5  allows such flexibility, and it would appear that on-road

 6  engines will actually offer a greater opportunity for us

 7  to repower more kinds of construction equipment than we

 8  can currently.  Currently there's only about seven models

 9  of construction equipment that can be repowered.  We think

10  there's enough potential benefit that you should harmonize

11  the Moyer guidelines with the off-road diesel regulation.

12           Finally, we think that you should go a lot

13  further than these guidelines and changes to the Moyer

14  program.  The program needs to be structurally changed to

15  keep pace with the regulatory environment.  Our industry

16  is currently under three rules.  It will be five rules

17  soon with the off-road rule and the large spark ignition

18  rule taking effect.  And we need to be able to get the

19  Moyer money addressed in that area.

20           The Moyer requirements are not conducive to

21  post-regulated industries.  Within the next two years

22  virtually every diesel engine in the State of California

23  that you have the power to regulate will be under some

24  form of regulation.  And the Moyer money will start to go

25  begging under those circumstances.

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 1           Overcompliance programs like the SOON program,

 2  emission reductions in this area are important to achieve.

 3  So the priority should be to diminish the restrictions on

 4  overachieving emission reductions rather than having

 5  additional requirements.

 6           We want to go with you to the Legislature to talk

 7  about this.  Our legislative group is called the

 8  Construction Coalition.  It's composed of our associations

 9  and our trade unions that we work together with.  We'd

10  like to meet with your people to see if we can find a

11  mutually agreeable path to legislative change for the

12  Moyer program to expand its ability to improve emissions

13  here in the State of California.

14           Thank you very much.

15           CHAIRPERSON NICHOLS:  Thank you for your

16  comments.  I think --

17           BOARD MEMBER D'ADAMO:  Question.  Oh, sorry.

18           CHAIRPERSON NICHOLS:  Excuse me.

19           Thank you for your comments.  I think we all

20  agree with you about the need to expand the program.  It's

21  been tremendously successful.

22           MR. DAVIS:  It has been very successful.  And our

23  people are -- they spent over a hundred million dollars

24  doing this.

25           CHAIRPERSON NICHOLS:  Ms. D'Adamo.

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 1           BOARD MEMBER D'ADAMO:  I'd just like to have

 2  staff respond to some of the recommendations, specifically

 3  the issue regarding destruction of the chassis, let's see,

 4  the on-road engine -- possibilities for utilization of

 5  on-road engines.

 6           And then there was a third issue.

 7           There was the district issue.

 8           BOARD MEMBER BERG:  There was operate in the

 9  district -- district versus the state residence.

10           CARL MOYER OFF-ROAD SECTION MANAGER SALARDINO:

11           To respond to the first issue there of destroying

12  the piece of equipment, Moyer generally does have a

13  destruction requirement within the guidelines.  And --

14           MR. DAVIS:  In the past it's only been the

15  engines.

16           CARL MOYER OFF-ROAD SECTION MANAGER SALARDINO:

17           And the reason for doing it in this case is

18  because we don't want those pieces of equipment to just be

19  repowered and then entered back into the market.

20           MR. DAVIS:  But if they're repowered with

21  appropriate engines, engines that meet the standards under

22  the state law, why not?  The hydraulic systems don't

23  contribute to emissions.  The tires don't contribute to

24  emissions.  The tracks, the teeth -- you know, these

25  machines last for 40 years.  It's just -- we recycle in

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 1  our business.

 2           BOARD MEMBER D'ADAMO:  Yeah, that's what I'm --

 3  I'm just concerned regarding the waste issue and if

 4  there's any way that we could ensure that we're talking

 5  about a clean engine so that we could allow some

 6  flexibility.

 7           MR. DAVIS:  Under the off-road rule we don't have

 8  very many choices about that.

 9           RESEARCH DIVISION CHIEF CROES:  I think part of

10  the concern also is whether the entire machine gets

11  repowered as something dirtier or equal to what it was

12  when it got its Moyer money.  In other words, you know,

13  they get the money to buy a new one and then the other one

14  get fooled on.

15           BOARD MEMBER D'ADAMO:  I absolutely agree with

16  that point of view.  But is there a way to address those?

17           RESEARCH DIVISION CHIEF CROES:  So maybe we can

18  work with them in terms of seeing whether or not at least

19  parts recycling can be handled in a way that that makes

20  sense.  There are -- you know, in other programs, for

21  example, they do thing where they -- maybe they do disable

22  a chassis and allow all the other parts to be recycled,

23  for example, or find some other way to make sure that the

24  piece of equipment doesn't come back as something that is

25  bad.

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 1           EXECUTIVE OFFICER GOLDSTENE:  And while it's

 2  not -- this is not a direct comparison.  The Passenger

 3  Vehicle Retirement Program that is run by the Bureau of

 4  Automotive Repair requires that the entire car be

 5  destroyed, including many of the parts the collectors

 6  want, because the idea of the program is to not have those

 7  older cars on the road.  And I think some of that thinking

 8  obviously is part of here.  But we should work -- see if

 9  we can work something out that makes sense.

10           MR. DAVIS:  Be more than happy to sit down with

11  you guys about this.  This is truly a case of where the

12  sum of the parts is greater than the whole.

13           EXECUTIVE OFFICER GOLDSTENE:  Collectors say the

14  same thing.  We just want to make sure these vehicles are

15  not repowered with some similar engine.  We want to get

16  them off the road.

17           MR. DAVIS:  We have to meet fleet averages under

18  this off-road diesel regulation and we wouldn't be doing

19  that.

20           RESEARCH DIVISION CHIEF CROES:  On the

21  multi-district issue, we basically, as I understand it, do

22  have ways of using multi-district funds that the staff --

23           MR. DAVIS:  Have a statewide program that we're

24  aware of.  But very few people qualify.

25           RESEARCH DIVISION CHIEF CROES:  Well, maybe we

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 1  can work with you in terms of how they qualify, because

 2  they're -- I guess what I'm saying is that the Moyer

 3  program already has a mechanism in it where, quote,

 4  there's multi-district funds which are set aside to deal

 5  with projects that cover over -- that cross district

 6  lines.

 7           MR. DAVIS:  How is that as a percentage of the

 8  total Moyer $140 million program?

 9           ON-ROAD CONTROLS BRANCH CHIEF KITOWSKI:  It's

10  currently -- this is Jack Kitowski, Chief of On-road.

11           It's currently 10 percent of the funding that we

12  have available.  There is a legislative bill in place by

13  Senator Florez to increase that to 20 percent per the

14  recommendations of the Bureau of State Audit.

15           The other point of that is we've noticed in the

16  last couple of years that several of the districts who

17  used to have very strict requirements within their own

18  district, 75 percent or 100 percent was very common,

19  they've started to loosen those up.  San Joaquin is, you

20  know, is very --

21           MR. DAVIS:  Very accommodating and interested in

22  getting their funding out into the industry.

23           ON-ROAD CONTROLS BRANCH CHIEF KITOWSKI:  Others

24  are assessing that as well.

25           MR. DAVIS:  We welcome that.  The issue really is

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 1  the multi-district funding levels are -- you know, they're

 2  10 percent of the total money that's available.  And our

 3  guys operate in, like I said, anywhere from two to six

 4  different districts.

 5           BOARD MEMBER BERG:  But I think the problem here

 6  also is the fact that the districts have very challenging

 7  emissions to hit.  And so they need to go after the

 8  dirtiest equipment that's going to be in their districts

 9  for the longest.  And until the point that the demand does

10  not exceed the funding dollars, there's no reason for them

11  to look at that.  At the point where their demand is less

12  than the funding dollars, then the market demand will then

13  change their thinking because you'll be able -- you'll

14  want to get the next level that maybe is in the district

15  for 75 percent of the time and 65 percent of the time.

16  And that's the way that works.

17           CHAIRPERSON NICHOLS:  I think we need to bring

18  this conversation to a close here.

19           If there are more questions --

20           BOARD MEMBER D'ADAMO:  Well, I have a

21  recommendation on maybe how we could move forward.  This

22  doesn't -- it kind of reminds me of the 1B funding issue.

23  There are multi-district projects that we're hoping that

24  the districts will be able to benefit from.  And so I

25  would just suggest that maybe if you work with staff and

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 1  we bring CAPCOA into it, there may be instances where some

 2  light could be shed on this.  And the districts that have

 3  the more onerous requirements would see that they could

 4  stand to benefit because of other districts being a little

 5  more flexible.  I suspect that --

 6           ON-ROAD CONTROLS BRANCH CHIEF KITOWSKI:  We have

 7  engaged them in that in the past and we'd be happy to do

 8  it again.

 9           RESEARCH DIVISION CHIEF CROES:  The answer on

10  on-road engines is we'll work with them on that as well.

11           MR. DAVIS:  Thank you all very much.

12           CHAIRPERSON NICHOLS:  Thank you.

13           Mr. Wyman.

14           Joe Wyman?

15           All right.  Gary Rohman.

16           MR. ROHMAN:  Good afternoon, Chairperson Nichols

17  and members of the Board.  My name is Gary Rohman.  I'm

18  Vice President of ECCO Equipment Corporation.

19           ECCO is a heavy construction equipment rental

20  company that started business in 1962.  And we rent

21  equipment up and down the State of California.

22           We requested and were granted Carl Moyer fundings

23  to the tune of $4.4 million over the last two years and we

24  repowered 23 pieces of equipment.  It was helpful in

25  reducing emissions on our fleet.  And when you combine

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 1  Carl Moyer and our own emission -- company emission

 2  reduction policy, we improved our fleet from 98 percent

 3  Tier 0 engines in 2000 to 23 percent in 2008.

 4           Carl Moyer funding is no longer available for our

 5  company since the adoption of the off-road diesel rule.

 6  And we have -- currently we have no discretionary dollars

 7  to fund additional repowers.  Our rental business is off

 8  47 percent and our yards are full of idle rental

 9  equipment.  We decreased our fleet by 79 machines last

10  year, not because we were trying to meet the requirements

11  of the off-road regulation, but because we were attempting

12  to survive the downturn in the economy.

13           We have real concerns that we are unable to meet

14  the hour requirements attached to the Moyer funding.  We

15  are even more concerned that neither the CARB staff or the

16  Board have felt it necessary to place a trigger provision

17  in the regulation that would protect the shareholders --

18  or the stakeholders during times of economic downturn.

19           We believe that we have a very tough road ahead

20  of us.  And we are trying to comply -- and trying to

21  comply with the off-road regulation will have devastating

22  effects on the construction industry.  We are, however,

23  optimistic.  We think that we may see some type of a

24  release in 2010.

25           In conclusion, it is our desire to have your

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 1  Board stay on top of the Moyer program, making sure that

 2  dollars are deemed where they can do the most good.  We

 3  think that the construction industry is worthy of funding

 4  on an ongoing basis.  I echo Bill Davis's remarks on

 5  geographic limits and the destruction of chassis, et

 6  cetera.  We also desire the flexibility to install on-road

 7  engines in off-road applications.

 8           Thank you.

 9           CHAIRPERSON NICHOLS:  Thank you.

10           Questions?

11           No.

12           Thank you.

13           Marcus Platt, followed by Jennifer Ehn.

14           MR. PLATT:  Madam Chair, members of the Board.

15  Thank you for having us today.

16           Most of my questions were answered.  I just have

17  a few things.

18           I work for Boatswain's Locker.  We distribute

19  high efficiency Tier 2 diesel engines here in California,

20  in Nevada, Arizona, Hawaii, and the Country of Mexico.

21           We are primarily in the marine industry, which

22  is -- I know in the whole scheme of things seems fairly

23  small.  But in actuality there is thousands of charter and

24  fishing boats up and down the California coast.

25           I would also like to reiterate on the last

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 1  gentleman's multi-district reference, that a lot of these

 2  fishermen and these charter companies transit the coast,

 3  up and down from the coast of Mexico to the Oregon border,

 4  but do reside and work in California also.  And I'm

 5  wondering how that we can help them to repower these

 6  vessels with more efficient engines.

 7           One of our primary clients is one of the largest

 8  charter fleets in California and in the United States, is

 9  Hornblower Cruises.  I don't know if any of you know of

10  them.  They run San Francisco, Los Angeles, Newport Beach,

11  San Diego, New York, and various other places.  They have

12  seven or more vessels on the West Coast, and would love to

13  have some funding.

14           The applications also I believe are a little bit

15  daunting for some of our clients.  They seem to be a

16  little caught up in the red tape.  But you answered that.

17  Apparently they're going to ease that up a little bit and

18  make it a little bit easier to deal with.  That's a good

19  thing.

20           A lot of our other clients work in the Delta

21  area.  These are heavily populated areas.  One such client

22  is Salt River Construction.  I don't know if you know of

23  them.  They run levee support systems up and down the

24  Delta.  They repair levees in storm situations and things

25  like that.  They have equipment that's not necessarily

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 1  older but could use to be replaced.  And as they are

 2  working in highly populated areas, I think that to reduce

 3  their particulate matter would be a definite, you know,

 4  plus.

 5           So I just would like to ask that you look

 6  closer -- I know that the funding for marine industry is

 7  small in the whole scheme of Carl Moyer.  But if you guys

 8  could maybe look at it a little bit more closely and maybe

 9  think of these guys a little bit better, let's get them

10  some cleaner engines and, you know, see if we can't make

11  them happy and clean up the air a little bit.

12           And that's all I have.  Thanks.

13           CHAIRPERSON NICHOLS:  Thank you very much.

14           Jennifer Ehn.

15           MS. EHN:  Good evening, Chairman Nichols, members

16  of the Board.  My name is Jennifer Ehn.  I work for John

17  Deere.  I'll be very brief.

18           We just wanted to come up and support the

19  resolution allowing additional time for project life for

20  ag equipment.  Currently we are gathering data on ag

21  equipment and we're working with various ag groups in

22  order to compile all this information.  We look forward to

23  working with the ARB staff in the future to provide you

24  this information.

25           Thank you.

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 1           CHAIRPERSON NICHOLS:  Thank you.

 2           Tim Carmichael.

 3           MR. CARMICHAEL:  Good evening.  Tim Carmichael

 4  with the Coalition for Clean Air.  Just a couple of brief

 5  comments.

 6           Is this working?

 7           CHAIRPERSON NICHOLS:  Yes.  Thanks.

 8           MR. CARMICHAEL:  Thank you.  I appreciate Mr.

 9  Goldstene looking out for my interests.

10           Thank you to Board Member Berg for -- she talked

11  about how dynamic the meetings were.  What she didn't

12  share with her colleagues was what a good job she did in

13  facilitating those meetings, because not everybody in the

14  room agreed, and we all had opinions, pretty strong

15  opinions.  And I thought she did a very good job in

16  facilitating those discussions.

17           The second point I want to mention is, the staff

18  didn't specifically call out one of the things that we

19  agreed to talk more about this year, which is the need for

20  the Moyer program to evolve, and to consider greenhouse

21  gas and petroleum reduction goals along with the PM and

22  NOx goals that the state has.  We're not right now making

23  the most of the public money.  And we want to, you know,

24  make sure that we make the most of it going forward.

25           There was a reference to the coordination between

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 1  the Moyer program and Prop 1B.  And I know just from a few

 2  conversations with the staff over the last couple of weeks

 3  that that is not going as smoothly as people thought it

 4  was going to.  And I just want to note for the record I'm

 5  aware that Mr. Goldstene has agreed to sit down with his

 6  staff and Barry Wallerstein and the staff of the AQMD to

 7  talk about how these programs right now may actually be

 8  working against greater use of alternative fuels in the

 9  way they're coordinating.  And we're very concerned about

10  that.  We appreciate that your staff is going to very

11  shortly be sitting down to try and work through that

12  issue.

13           And, finally, just talking with my colleague,

14  Allan Lind, about communications around this program.  We

15  think it would be valuable as regulations are adopted by

16  this Board that the Executive Officer send an advisory to

17  the Carl Moyer participants.  It could be on the web,

18  could be through the list serve.  But the more notice you

19  give to the industries that feel like there's a funding

20  stream there and it's going to go away a year, two, three

21  years from now, the better off we will all be.  And I

22  don't know that that proactive communication is happening

23  right now.

24           Thank you.

25           CHAIRPERSON NICHOLS:  Thank you.

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 1           I think that's an important point is this --

 2  although the demand is very high for this program, not

 3  everybody who ought to know about it does know.  And I

 4  don't think it's wrong to get even more requests in,

 5  because it will help establish what the true funding need

 6  really is out there.  So I think it's -- I think that's a

 7  good point.

 8           RESEARCH DIVISION CHIEF CROES:  We are doing that

 9  actually.  We're mailing out to all -- reaching out to all

10  these industries, both the construction industry and the

11  trucking industry, letting them know what's going on.

12           CHAIRPERSON NICHOLS:  Good.  Thank you.

13           Camille Kustin.

14           I'm sorry.

15           MR. CARMICHAEL:  I just want to clarify.  We

16  should follow up on that, because we're not sure that

17  everybody that's participating in the Carl Moyer Program

18  is actually getting that notification.  And so we'll

19  follow up with your staff on that.

20           CHAIRPERSON NICHOLS:  To work on how to improve

21  that process.

22           All right.  Thank you.

23           Camille Kustin.

24           MS. KUSTIN:  Hi.  Good afternoon.  Camille Kustin

25  with Environmental Defense Fund.

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 1           I just wanted to say a quick thank you to the

 2  staff for their work on this and for including us as part

 3  of the process.  And also a especial thank you to Board

 4  Member Berg for her leadership and work with the working

 5  group.  It was a spirited bunch.  And a lot got

 6  accomplished during those meetings.

 7           And just that -- you know, the Moyer program was

 8  designed to not cover everything and to provide for early

 9  reductions, and the staff has continued to follow in that

10  spirit of the program.  So we're generally pleased with

11  the revisions, and we hope it will continue to be a

12  successful program.

13           Thank you.

14           CHAIRPERSON NICHOLS:  Thank you.  Thank you for

15  coming and spending your evening this us.

16           That concludes the list of witnesses that I have

17  in front of me.  And I don't see anybody else rising.  So

18  I think we can finish the hearing.

19           Does the staff have any additional comments at

20  this time before we close the hearing?

21           SUPERVISOR HILL:  Madam Chair, I have some

22  questions when you get time.

23           CHAIRPERSON NICHOLS:  Questions of the staff?

24           SUPERVISOR HILL:  Yes.

25           CHAIRPERSON NICHOLS:  Yes.  Okay, go ahead.

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 1           SUPERVISOR HILL:  Thank you.

 2           One is the issue raised by Mr. Buttner from the

 3  Rice Commission.  And I notice he had a issue that he

 4  raised about directing staff to come back in six months to

 5  look at the useful life of farm equipment in California

 6  and reevaluate that five-year project life factor.  Is

 7  that something that you feel would be worthwhile?  I think

 8  it never hurts to do that.

 9           ON-ROAD CONTROLS BRANCH CHIEF KITOWSKI:  Yeah,

10  we've been coordinating with the agricultural industry,

11  Paul -- Mr. Buttner, Mr. Isom and others in that industry

12  in development of the off-road fleet modernization quite a

13  bit.

14           We had -- in our resolution we do have existing

15  language.  It's not quite what he had, but I think he was

16  comfortable with it.  Basically we can put a timeframe on

17  it, but it's really going to be dependant on when the data

18  is available for us to analyze.  And we're very willing to

19  go earlier if the data's there and do what we can.  But we

20  need that data in order to move forward on it.  And I

21  think he's in a place where he's comfortable with it.  We

22  have talked and I think he concurs with our current

23  resolution.

24           SUPERVISOR HILL:  Thank you for that.

25           And then the other question.  South Coast raised

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 1  the issue of the fleet modernization program and there's

 2  trucks '90 to '93 and how they're excluded.  Is that true

 3  and --

 4           ON-ROAD CONTROLS BRANCH CHIEF KITOWSKI:  Let me

 5  characterize it a little differently.  Our fleet

 6  modernization program since it was adopted in the 2005

 7  guidelines has always been limited to 1991 and older --

 8  you know, pre-1991 trucks.  We were looking at expanding

 9  the program.  You know, when we expand the program and go

10  into a new category area, we take it quite seriously.  And

11  we look at whether the emission reductions are real and

12  surplus, whether they'll be quantifiable and SIP

13  creditable.  And so there is quite a bit of work that goes

14  into it.

15           And we were starting that process and then, you

16  know, along came the bond.  And the bond's putting 760

17  million into replacing trucks, and we're 1 percent of

18  that.  It really did not seem worthwhile to spend a lot of

19  staff resources for, you know, 1 percent of the issue.

20           We will be watching the bond.  And if we think

21  there's a gap there, a niche that Moyer can fill, we will

22  look at it.  But at this point we didn't think it was

23  worth investing.

24           SUPERVISOR HILL:  Okay.  And I did like the idea

25  of expanding the Carl Moyer website to include a lot more

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 1  information related to the districts and the application

 2  there.  I think that would be important.

 3           Thank you, Madam Chair.

 4           CHAIRPERSON NICHOLS:  Thank you.

 5           Any other questions or comments to staff about

 6  it?

 7           BOARD MEMBER D'ADAMO:  Move adoption of the

 8  resolution.

 9           CHAIRPERSON NICHOLS:  Okay.  Do we have a second?

10           BOARD MEMBER BERG:  Second.

11           CHAIRPERSON NICHOLS:  A second.

12           Before we vote, I just want to also add my thanks

13  to those of the others, to Board Member Berg for having

14  taken on this assignment.  It was above and beyond the

15  call of duty, and obviously it worked out well.  But it's

16  also saved I think the rest of us a tremendous amount of

17  time and effort in presiding over all of these sometimes

18  contentious meetings.  So we really appreciate your help

19  here.

20           With that, I'll ask everybody in favor to

21  please --

22           CHIEF COUNSEL JENNE:  Chairman Nichols, I note

23  that there's not a -- doesn't seem to be a quorum up there

24  now.  I'm not sure where the sixth person went to.

25           CHAIRPERSON NICHOLS:  Sorry.  Mr. Sperling had to

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 1  step out of the room to take a call.  He is planning to

 2  return, however.  So if we can't vote until he gets here,

 3  we'll just have to postpone the vote.  That's too bad.  He

 4  was planning to be here.  And he is here in the building.

 5           BOARD MEMBER BAUMS:  Yeah, I'm driving him back

 6  to Berkeley, so I think he's still around.

 7           CHAIRPERSON NICHOLS:  Yeah.  No, no, he's

 8  definitely --

 9           (Laughter.)

10           CHAIRPERSON NICHOLS:  He's definitely in the

11  building.  He was just responding to some of the questions

12  that came up from folks about the earlier Board action.

13           All right.  We'll just table this for the moment

14  then and bring it back as soon as we get him back in the

15  room.

16           We're going to have a similar problem with the

17  next item.  We can hear it, but we won't be able to vote

18  until he returns.

19           I was not expecting him to be gone for this

20  length of time, however.  Maybe I should send a clerk.

21           Is somebody going?

22           Okay, good.

23           Well, we can begin, I think -- unless you think

24  we should just take a break.

25           Why don't we just take a ten-minute break then.

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 1           Thanks, everybody.

 2           We'll take the vote when he gets back.

 3           (Thereupon a recess was taken.)

 4           CHAIRPERSON NICHOLS:  All right.  We need to get

 5  back to work, ladies and gentlemen.  Everybody wants to go

 6  home.

 7           We had a motion, a second, and we were ready to

 8  call the vote when we realized that we didn't have the

 9  quorum in the room to actually vote.  But that's okay,

10  because Board Member Sperling was doing, if not God's

11  work, at least the Air Resources Board's work.

12           (Laughter.)

13           CHAIRPERSON NICHOLS:  So at this point I think we

14  need to have a vote.

15           So would all in favor please signify by saying

16  Aye.

17           (Ayes.)

18           Any opposed?

19           There are none.

20           Good.  We've done it.

21           All right.  Now we can move to the Lower-Emission

22  School Bus Program.

23           EXECUTIVE OFFICER GOLDSTENE:    Thank you,

24  Chairman Nichols, Board members.

25           The Lower-Emission School Bus Program protects

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 1  the health and safety of California's school children.

 2  Since the program's inception in 2000, over $100 million

 3  in state funds have been used to replace approximately 600

 4  of the oldest, most polluting public school buses and to

 5  retrofit another 3,800 middle-aged diesel buses.

 6           Eight years ago we estimated that about 6600 high

 7  polluting pre-1987 school buses were still operating in

 8  our public schools.  Today, less than half of these buses

 9  remain in use and only 74 are of the oldest vintages, the

10  pre-1977 buses built before minimum federal motor vehicle

11  safety standards went into effect.

12           This significant progress in upgrading

13  California's school bus fleet is the result of dedicated

14  funding efforts at the local and state levels and their

15  cooperative partnerships with local air districts and

16  school districts.

17           With Senate Bill 88, the Governor and the

18  Legislature appropriated $193 million from Prop 1B to the

19  ARB to continue our success with the Lower-Emission School

20  Bus Program.  This funding level represents nearly twice

21  the amount of the funds the program has received since it

22  began eight years ago.

23           As you'll hear in the staff presentation, these

24  funds now provide us the opportunity to eliminate the

25  remaining pre-1977 school buses from our public school bus

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 1  fleets and to replace about 40 percent of the remaining

 2  1977 to 1986 model year buses.  In addition, these funds

 3  will allow school bus fleets to retrofit significant

 4  numbers of middle-aged diesel buses that still have

 5  substantial road life.  Dollar for dollar, the air quality

 6  and health benefits of diesel retrofits are huge.

 7           Now, I'll turn the presentation over to Mr. Earl

 8  Landberg of our Mobile Source Control Division, who will

 9  provide an overview of the staff's proposed revisions.

10           Earl.

11           AIR POLLUTION SPECIALIST LANDBERG:  Thank you,

12  Mr. Goldstene.

13           Chairman and members of the Board.  I know it's

14  been a long day.  My presentation will take less than 20

15  minutes, as I present the staff's revisions to the 2008

16  Lower-Emission School Bus Program Guidelines and the

17  proposed funding allocations.

18                            --o0o--

19           AIR POLLUTION SPECIALIST LANDBERG:  In today's

20  presentation I will be giving a little background on the

21  goals and history of the program, including the effect an

22  upcoming regulation may have on school buses.  I will then

23  discuss the current authority for this program's source of

24  funding and the direction that has been given by the

25  Governor and the Legislature.

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 1           I will go over the most significant revisions to

 2  the guidelines and present the estimated emission

 3  reductions and the number of bus replacements and

 4  retrofits that we are expecting from the program.

 5           I will wrap up by presenting several issues that

 6  have had impact on the development of the guideline

 7  revisions and end with staff's recommendations.

 8                            --o0o--

 9           AIR POLLUTION SPECIALIST LANDBERG:  The primary

10  goal of the Lower-Emission School Bus Program is to reduce

11  children's exposure to both cancer-causing and

12  smog-forming pollutants through the replacement of old

13  buses with safe, clean buses and the installation of

14  retrofits on the in-use fleet.

15           The program provides funds to accelerate

16  replacements of pre-1987 buses with an emphasis on the

17  pre-1977 model year school buses, which predate any

18  minimum federal safety standards.  The program also funds

19  particulate retrofits for middle-aged buses.  With an

20  upcoming regulation, retrofits will play a stronger role

21  in this round of program funds.

22                            --o0o--

23           AIR POLLUTION SPECIALIST LANDBERG:  The Board

24  established the Lower-Emission School Bus Program in

25  December of 2000.  And since then, over $100 million in

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 1  state funds has gone to replace 600 public school buses

 2  and retrofit 3800 in-use middle-aged buses.  At the start

 3  of the program, there were about 1,900 pre-1977 public

 4  school buses transporting students within the state, and

 5  currently fewer than 100 remain.  All in all, since 2000 a

 6  significant number of older school buses have been

 7  replaced.

 8           Such substantial progress has been a cooperative

 9  effort at both the state and local level.  However, this

10  progress also serves to illustrate that our work is not

11  yet finished.

12                            --o0o--

13           AIR POLLUTION SPECIALIST LANDBERG:  In the fall

14  of 2008 the Board is scheduled to consider a proposed

15  regulation to reduce emissions from in-use heavy-duty

16  diesel-fueled vehicles.  This regulation as currently

17  proposed would require all diesel-fueled school buses to

18  have a diesel particulate filter.  This would necessitate

19  about 10 to 15,000 retrofits statewide.

20           For most school districts, the first potential

21  compliance milestone would be December 31st of 2010.  The

22  Lower-Emission School Bus Funding Program can help reduce

23  the cost of compliance with this proposed regulation.

24                            --o0o--

25           AIR POLLUTION SPECIALIST LANDBERG:  Proposition

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 1  1B, the Highway Safety, Traffic Reduction, Air Quality,

 2  and Port Security Bond Act of 2006, was approved by

 3  California voters in November of 2006, and provides $200

 4  million for new school bus purchases and retrofits for

 5  existing buses.  After taking off the costs for bond

 6  financing and less than one percent for the program

 7  administration for the ARB, about $191 million is

 8  available for grants to the local air districts.

 9           Senate Bill 88 provides the legislative direction

10  for funds expended by Prop 1B funds, including the school

11  bus portion.

12           Finally, the Governor signed Executive Order

13  S-02-07 that applies to all the bond funds approved in the

14  November 2006 election, not just Proposition 1B funding or

15  the school bus element of the Prop 1B.  This Executive

16  Order requires robust accountability of bond fund

17  expenditures.

18                            --o0o--

19           AIR POLLUTION SPECIALIST LANDBERG:  As in past

20  iterations of the Lower-Emission School Bus Program

21  guidelines, we have attempted to create a balanced program

22  that emphasizes the importance of retrofitting in-use

23  middle-aged school buses and replacing the oldest school

24  buses still in operation within the state.

25           In support of these proposed guidelines, staff

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 1  has engaged in two public workshops, in El Monte and

 2  Sacramento in September of last year.  We also held an air

 3  district coordination meeting in February of this year and

 4  several meetings with environmental organizations, school

 5  district representatives, and industry stakeholders.

 6           ARB staff has ramped up our ongoing outreach to

 7  get school districts involved in this program ahead of the

 8  proposed regulation so they understand the requirements of

 9  the regulation and the technology needed to meet the

10  regulation and how the Lower-Emission School Bus Program

11  can help them comply while the emission reductions are

12  still surplus.

13                            --o0o--

14           AIR POLLUTION SPECIALIST LANDBERG:  Before I

15  discuss the proposed funding allocation, let me highlight

16  the legislative direction that we have received regarding

17  the allocation.

18                            --o0o--

19           AIR POLLUTION SPECIALIST LANDBERG:  The key

20  allocation provisions of Senate Bill 88 require that funds

21  be used to first replace the remaining 1976 and older

22  model year buses in California, followed by allocating the

23  remaining funds to air districts based on each district's

24  share of the 1977 through 1986 model year school bus

25  population.  SB 88 allows air districts the discretion to

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 1  determine how to split their funding allocations between

 2  new school bus purchases and retrofits after ensuring

 3  funds for pre-1977 bus replacements.

 4                            --o0o--

 5           AIR POLLUTION SPECIALIST LANDBERG:  The pie chart

 6  on top is the population of in-use pre-1977 model year

 7  school buses by air district.  These buses are slated for

 8  replacement first.

 9           The pie chart on the bottom shows the

10  distribution of pre-1987 school buses in the air districts

11  and the proposed allocation based on the provisions of SB

12  88.

13           Recognizing that Prop 1B funds used for the

14  school bus program require increased accountability and

15  necessitate additional air district resources, air

16  districts may use up to 2 percent of their total

17  allocation of state program funds for administration.

18  Additionally, an air district may use a total of 7 percent

19  of funding that it designates to retrofits for

20  implementation and outreach for the retrofit component of

21  its program.

22                            --o0o--

23           AIR POLLUTION SPECIALIST LANDBERG:  Here are some

24  of the most significant changes to the program that I will

25  cover in the next few slides.

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 1           Staff is proposing new air district

 2  implementation options and a detailed timeline with

 3  performance milestones so air districts will know in

 4  advance what is required of them and when they need to

 5  have it done.

 6           Modifications to the replacement and retrofit

 7  requirements have been incorporated into the proposed

 8  guidelines to reflect the current state of school bus

 9  engine technology.

10           Increased oversight and accountability are common

11  themes throughout the proposed guidelines, due to the

12  additional contract, reporting, and document retention

13  requirements required by the Governor's Executive Order

14  and SB 88.

15                            --o0o--

16           AIR POLLUTION SPECIALIST LANDBERG:  In the past,

17  the CEC has provided assistance in implementing the school

18  bus program in those air districts that did not operate

19  their own program.  However, the CEC has been given new

20  responsibilities in other areas and will not be able to

21  assist the ARB with the school bus program.  So ARB

22  proposes to provide air districts with one of the

23  following:

24           They implement the program on its own.

25           Partner with a neighboring air district or a

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 1  larger regional district.

 2           Or they can call on us with assistance from the

 3  California Air Pollution Control Officers, or CAPCOA, to

 4  implement their local program.

 5           The funds spent within each air district will be

 6  the same regardless of what organization implements the

 7  program.

 8           In air districts for which the ARB implements the

 9  Lower-Emission School Bus Program, ARB will initiate grant

10  award agreements directly with school districts, and

11  CAPCOA will assist with outreach to school districts and

12  will assist school districts with the application process.

13                            --o0o--

14           AIR POLLUTION SPECIALIST LANDBERG:  It is

15  important to note that awards will go to districts in

16  April to give them the most time to expend their funds, a

17  little over three years.  Funds will be made available to

18  districts once they can demonstrate readiness and that

19  they have a robust program in place that covers the

20  required accountability.  Up to 65 percent of the funds

21  will be available through June 30th, 2009.

22           We have built in milestones to ensure that the

23  oldest pre-1977 buses are replaced first, while pushing

24  districts to also get some retrofits in place early, well

25  in advance of the first proposed regulatory compliance

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 1  milestone.

 2           As noted on the timetable, June 30th of 2010 is

 3  six months before the first compliance milestone for the

 4  upcoming regulation.  As currently drafted, retrofit funds

 5  for some buses may no longer be available after this date

 6  since these funds require emissions to be surplus.

 7                            --o0o--

 8           AIR POLLUTION SPECIALIST LANDBERG:  I will next

 9  discuss the school bus replacement and retrofit portion of

10  the proposed guidelines.

11                            --o0o--

12           AIR POLLUTION SPECIALIST LANDBERG:  Public school

13  districts will apply for funding from their local air

14  district or ARB.

15           A school bus eligible for replacement must be

16  owned by a public school district or several public school

17  districts acting as a Joint Powers Authority.

18           The bus must be a model year 1986 or older.  The

19  bus must be operational.  This is demonstrated by having

20  maintained a current CHP safety certification as of

21  December 31st of 2005.  And the bus must have a gross

22  vehicle weight rating greater than 14,000 pounds.

23           And the old bus must be scrapped as required by

24  SB 88.

25                            --o0o--

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 1           AIR POLLUTION SPECIALIST LANDBERG:  We propose to

 2  allow engines at 1.4 gram NOx or cleaner to be eligible

 3  for funding.

 4           In order to maximize state funds, funding for

 5  school bus replacements will be limited to a maximum of

 6  $140,000 per bus.  If the school district selects an

 7  alternative fueled bus replacement, then 10 percent may be

 8  added for infrastructure.

 9           For the replacement of pre-1977 model year school

10  buses there will not be a match requirement from the

11  school district.  However, staff is proposing a $25,000

12  match for the replacement of 1977 to 1986 buses.

13           As in previous versions of the guidelines, these

14  proposed guidelines continue the policy of requiring a

15  match contribution for new bus replacements.  This ensures

16  a cooperative relationship between the state, local air

17  districts, and the school district further extending funds

18  to maximize the number of eligible school buses that can

19  be replaced.

20           The match funding can either be paid by the

21  school district or the local air district from eligible

22  funding sources such as motor vehicle surcharge fees.

23                            --o0o--

24           AIR POLLUTION SPECIALIST LANDBERG:  In this slide

25  we look at the cost, including tax, of a typical

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 1  transit-style school bus.  A 2008 model year diesel-fueled

 2  school bus costs a little under $140,000.  With the school

 3  district's 25,000 buy-in, the school bus program pays

 4  $115,000.  A 2007 model year CNG school bus came in around

 5  $160,000.  With the buy-in the program would pay $135,000.

 6           Finally, the cost for a plug-in hybrid bus is at

 7  about $210,000.  In this example, the program pays

 8  $140,000 and the district would pay the remaining $70,000.

 9           Because these funds will be carried over a

10  three-year period, there are uncertainties in future

11  school bus pricing over this time; hence, we would like

12  the Board to grant the Executive Officer the authority to

13  raise the cost cap for school bus replacements if needed.

14                            --o0o--

15           AIR POLLUTION SPECIALIST LANDBERG:  Retrofits

16  continue to be a vital components in the ARB's regulatory

17  and incentive programs.  Because retrofits are the most

18  cost-effective method of reducing emissions from school

19  buses, they provide the greatest health benefits per

20  dollar spent.

21           We are requesting that air districts commit to a

22  set percentage goal for retrofits.  In those air districts

23  that request the ARB and CAPCOA to assist in implementing

24  the program, ARB proposes that 25 percent of those funds

25  go toward retrofits.

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 1           It is important to remember that school buses

 2  that are retrofitted row fitted now, with the assistance

 3  of the Lower-Emission School Bus Program, will be in

 4  compliance with the proposed in-use on-road regulation.

 5  This will significantly reduce the future cost of

 6  compliance for schools.

 7           We are proposing a $20,000 cost cap for

 8  retrofits, although most retrofits will come in

 9  significantly less.  This includes the cost of the

10  retrofit for installation, as well as maintenance costs,

11  data logging costs, and a back-up filter for every 20

12  retrofits installed.  This is to reduce the bus downtime

13  when the filters are being cleaned.

14                            --o0o--

15           AIR POLLUTION SPECIALIST LANDBERG:  Eligible

16  applicants are public school districts that own their own

17  buses, and private companies that contract with public

18  schools are eligible to receive funding for retrofits.

19           We are proposing to allow funding for the

20  retrofit of model year 1987 and newer models with

21  ARB-verified Level 3 devices only.

22                            --o0o--

23           AIR POLLUTION SPECIALIST LANDBERG:  Some of the

24  major administrative changes to this year's proposed

25  guidelines are the requirements for the air districts to

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 1  develop a policies and procedures manual.  This manual

 2  will describe the air district's day-to-day operations of

 3  the program.  The requirements of the Governor's Executive

 4  Order and SB 88 require additional contract, reporting,

 5  and documentation retention requirements, which we have

 6  incorporated into the proposed guidelines.

 7           The Governor's Executive Order also requires the

 8  ARB to develop a three-part accountability plan and an

 9  on-line database.  The Department of Finance, or DOF, has

10  approved our accountability plan.  The plan consists of,

11  first, front-end accountability.  This will take the form

12  of these proposed guidelines, and when approved by the

13  Board will contain the requirements for running the

14  program.

15           Second, in-progress accountability.  This will

16  consist of an on-line database, where the ARB and the air

17  districts will directly enter data so that the ARB and the

18  DOF can track how funds are spent.  This database will

19  also be available to the public, where an individual can

20  see what new school buses have been replaced at their

21  child's school or how many buses have been retrofitted in

22  their area.

23           Finally, this database will serve as a report

24  generator for the air districts to help them comply with

25  the increased reporting requirements.

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 1           The third part of the plan is follow-up

 2  accountability.  This will consist of the ARB and DOF

 3  performing audits on the implementing agencies and also

 4  means that ARB will be audited as well.

 5                            --o0o--

 6           AIR POLLUTION SPECIALIST LANDBERG:  As a result

 7  of the implementation of these proposed guidelines, all of

 8  the remaining pre-1977 school buses will be replaced.  At

 9  this point we believe there to be less than 100 remaining

10  in service.  The shear fact that fewer than 100 pre-1977

11  school buses remain in service is a testament to the hard

12  work and dedication of the ARB, the local air districts

13  and school districts.  When these oldest school buses are

14  taken off the road in less than a year, we will all have

15  done something that we can be proud of.

16           And if replacing the last of the pre-1977s wasn't

17  enough, about 1,000 of the remaining 2700 1977 to 1986

18  public school buses will be replaced with this funding and

19  3500 Level 3 retrofits will be installed on middle-aged

20  in-use school buses.

21           Staff estimated that through 2020 emissions from

22  school buses replaced or retrofitted under these

23  guidelines will reduce about 3,000 tons of NOx, 200 tons

24  of PM, and 22,000 tons of carbon dioxide.

25           Based on early back-of-the-envelope calculations,

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 1  prop 1B funds will pay for almost one-third of the buses

 2  that need to be cleaned up to meet the upcoming retrofit

 3  regulation.

 4                            --o0o--

 5           AIR POLLUTION SPECIALIST LANDBERG:  Historically,

 6  it has been the policy that the air districts split their

 7  funding allocation for replacement buses between

 8  alternative-fueled and diesel-fueled buses.

 9           The purchase of alternative fuel school buses,

10  primarily CNG buses, has been an integral strategy in

11  advancing the programs' goals.  However, as heavy-duty

12  diesel engines have achieved significantly lower emission

13  levels once only attainable by alternative-fueled engines,

14  the number of available alternative-fueled engines

15  certified each year has decreased.  John Deere, the

16  primary manufacturer of school bus CNG engines, exited the

17  market in 2007.  Currently, the only certified

18  alternative-fueled engine eligible for the program is a

19  propane-fueled engine.  Although, a CNG engine may soon be

20  certified for use in a school bus configuration, but that

21  has not yet happened.

22           So at this point it is impractical to advocate an

23  alternative-fueled school bus funding split.

24           Staff is proposing a cost cap for new school

25  buses at $140,000.  This represents the current

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 1  replacement cost, including tax, of the largest

 2  diesel-fueled school buses.  Staff has had discussions

 3  with all of the new school bus vendors in the state, and

 4  all agree that this cost cap is very reasonable for

 5  diesel-fueled buses.  The cap provides some modest

 6  pressure on maintaining the prices low, and without it we

 7  may see price increases.

 8           Since the program has three years to expend these

 9  funds, and the future price increases in buses are

10  currently an unknown, as I mentioned earlier we are

11  proposing that the Board grant the Executive Officer the

12  authority to raise the cost cap as needed to accommodate

13  future price increases.

14           The final issue that I'm going to discuss is the

15  requirement for school districts to provide match funding.

16  In these revised guidelines, we propose to continue the

17  policy in previous guidelines of requiring a match

18  contribution for new school bus replacements.  As

19  proposed, the school bus program would pay over 80 percent

20  of the cost of a new bus, and the remaining 15 to 20

21  percent would be provided by the local air district or

22  school district.  We are aware of the current financial

23  concerns of the school districts.  However, we are also

24  aware that this is an issue of children's health and that

25  the state cannot entirely solve this issue alone.  The

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 1  match requirement is modest but is enough to ensure about

 2  200 more buses are replaced.  Tough decisions will need to

 3  be made.  Eventually some school districts are likely to

 4  pass on this funding at this time.  However, we are

 5  confident there will be enough interest in the program to

 6  spend the entire 200 million and more if it becomes

 7  available.

 8                            --o0o--

 9           AIR POLLUTION SPECIALIST LANDBERG:  Finally,

10  staff recommends that the Board approve the proposed

11  guidelines with minor clarifications included in your

12  packet, funding allocations, and grant to the Executive

13  Officer authority to increase the cost cap on new school

14  bus purchases as needed, to ensure that the program can

15  cover significant portions of the school bus replacement

16  cost in the future.

17           This concludes my presentation.  Thank you.

18           CHAIRPERSON NICHOLS:  Thank you.

19           We have a list of speakers here, a number of them

20  from school districts here who are opposed, all of them.

21  I hope we have some supporters.  Well, we've got a few.

22           All right.  Let's just go to the list.  I'll ask

23  you to come down front, if you could.  We'd like to get

24  through this if we can.

25           Ralph Meza, Stephen Rhoads, John Clements.

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 1           MR. MEZA:  Good evening, Madam Chair, members of

 2  the Board.  My name is Ralph Meza and I'm with the Fresno

 3  Unified School District.  I'm the Director of

 4  Transportation.

 5           And I think the bill is good to replace the

 6  buses.  We need to replace a lot of old buses.  We qualify

 7  for 46 of them.  But, as you know, funding is scarce.

 8  Funding is cut back.  They've asked us to cut back 8

 9  percent of our funding in transportation.  So with that

10  cutback, that means that we're going to have to come up

11  with a $25,000 match on top of the cost of the additional

12  cost of the bus.

13           We transport 75 students -- I mean our district

14  is 75,000 students.  We transport on a daily basis over

15  12,500 students.  So the cost of transportation is

16  enormous.  With cutbacks and additional costs to our

17  budget, it's going to be significantly impossible to run

18  our operation.  And I propose that you go back to the

19  table and reevaluate the whole outlook of this bill.

20           Thank you.

21           CHAIRPERSON NICHOLS:  Thank you.

22           Are you only looking at buying new buses versus

23  retrofitting buses?

24           MR. MEZA:  Well, we have 46 buses that qualify

25  under '77 through '86.

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 1           CHAIRPERSON NICHOLS:  But I mean you can --

 2           MR. MEZA:  They're up for replacement.  But on

 3  top of the replacement of buses, we're also looking at

 4  reduced capacities of buses.  So every time we replace

 5  three buses, we're going to have to add another one.  So

 6  that means we have additional funds coming out of our

 7  general fund to replace buses.  For every three buses that

 8  we replace because of reduced capacities, we have to add

 9  another bus to a route.

10           CHAIRPERSON NICHOLS:  Okay.  Thank you.

11           MR. MEZA:  Because we're going from 78 passengers

12  to 90 passengers down to 62-passenger and 52-passenger

13  buses.

14           CHAIRPERSON NICHOLS:  Thank you.

15           Stephen Rhoads, followed by John Clements and

16  Nikki Hughes.

17           MR. RHOADS:  The reason for that is because of

18  the seat belt law, because all of the new buses will have

19  seat belts.

20           First of all, I'd like to take a minute, if I

21  could, and thank the Coalition for Clean Air and the other

22  environmental groups, because they were the ones that

23  pushed this issue of new school buses.  And we owe this

24  money more to them than we do to anybody else.  And so I

25  would like to thank them.

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 1           Secondly, I've submitted a testimony and I also

 2  am passing out a little PowerPoint.  And there's two

 3  issues I want to talk about.  One is -- before I get to

 4  the recommendations.  One is the current crisis facing our

 5  school transportation.

 6           We have been horribly, horribly underfunded.  You

 7  will see that for the last 20 years we have only had our

 8  transportation funding from the state increase 40 percent.

 9  We've had a decline of 40 percent in the number of

10  children that ride school buses.  We are the last in the

11  nation.  We only have 16 percent of our kids who ride on

12  school buses.

13           Many, many school districts -- and you'll hear

14  some from today, are closing down.  They can't afford it.

15           The state match, how much the state gives for

16  reimbursement, is less than 50 cents to a dollar.  On page

17  5 of this handout, you'll see ten sample districts.

18  You'll find that the districts that are doing school

19  busing now either are rural districts or have a lot of

20  poor kids, because that's the only way they can get to and

21  from school.  That list of ten schools on page 5, on the

22  average they got 70 percent of those kids qualify for free

23  and reduced lunch.  And their reimbursement is on the

24  average much less than 50 percent.

25           When I was doing this last night I got a little

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 1  tired and I forgot to add Fresno and Selma from the

 2  valley.  I meant to put them on the list.  And their

 3  numbers are indicative of everybody else.  When you

 4  require a match, this money only is going to come out of

 5  the classroom, and it's mainly these type of kids that are

 6  going to be suffering.

 7           The second thing I want to talk about is the

 8  Governor's budget.  The Governor's budget is proposing

 9  that school transportation and special ed and the other

10  categorical programs be cut 6 1/2 percent from this year's

11  level.  And -- from this year's level they'll cut this.

12  And they're also proposing that general aid be cut.  There

13  is no way that these school districts are going to be able

14  to come up with a match.  It's very, very difficult.  It's

15  going to -- either they're not going to get the buses or

16  they're going to have to cut more.

17           As far as the requirements, the specific

18  regulations -- I'm sorry -- specific guidelines, we're

19  obviously opposed to the school district match of $25,000.

20  We think if you wanted that, you should have put that into

21  the SB 88, the enabling legislation.  The last time you

22  had school buses and in the school bus program, you had no

23  match.

24           Your cap -- we think what your cap's going to do

25  is -- if you're in the South Coast Air Quality District,

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 1  you're going to have to get a CNG bus.  If you're any

 2  place else in the state, you're going to get a diesel bus.

 3  Because the $140,000 even for a diesel bus is unrealistic

 4  if you've got to put air conditioning and other things

 5  into a bus.  So if you're outside of the South Coast, for

 6  $165,000 you can buy a diesel bus with everything you

 7  want.  You've got to spend another 30 or $40,000 or

 8  $50,000 if you're going to do a CNG bus.  That's what the

 9  people in South Coast are going to have to spend.  Not a

10  match of 25,000, but a match of somewhere probably around

11  40 to $50,000.  Those numbers -- the cap is unrealistic.

12           As far as how much should be spent on traps, SB

13  88 was very clear.  That decision is a local air quality

14  district.  They are the ones who are determining how much

15  gets spent on traps and how much gets spent on school

16  buses.  They could have, as they did in the past -- I say

17  "they," being the Legislature, gave that authority to ARB.

18  But this time they did not.  They gave it to the local air

19  quality district.  I don't think it's appropriate really

20  to make a recommendation.

21           The last thing -- the final thing is you got, I

22  think it's 2 1/2 million, 2.4 million for outreach for

23  traps.  This is a bond measure.  These are bond funds.  It

24  is totally inappropriate to use bond funds to support

25  outreach.  This is very important to us.  And we think

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 1  this is very unwise.  Because we hope to be able to use

 2  school bonds and other types of bonds for future school

 3  bus funds through the ARB.  And we don't want any

 4  publicity that might occur because of the misuse of the

 5  funds.

 6           Thank you very much.  I forgot to introduce

 7  myself.  My name's Steve Rhoads.  I represent the School

 8  Transportation Coalition.

 9           Thank you very much.

10           CHAIRPERSON NICHOLS:  Thank you.  We had you on

11  our list.

12           John Clements and then Nikki Hughes.

13           I'm going to have to start paying attention.

14           MR. CLEMENTS:  Good evening.  John Clements,

15  Kings Canyon Unified School District.  I'm just south of

16  Ralph's district, Fresno.  I cover eastern portions of

17  Fresno and Tulare County, about 600 square miles, having

18  64 school buses transporting 3,000 of my 9,000 students,

19  and serving about five or six environmental justice, I

20  guess you would say, communities, as over 80 percent of

21  our population is free or reduced lunch.

22           We've played the game well up to this point.  I

23  praise the Energy Commission for their pioneering spirit

24  in beginning with AB 35.  And I thank Jack and his staff

25  for the low emissions program.  We've replaced over

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 1  one-third of our school buses up to this point and we

 2  built our own CNG station and we've retrofitted everything

 3  we could possibly retrofit to Tier 1 level.

 4           And now I'm poised with:  Am I going to be able

 5  to play this game?  I'm on the list for possibly 21, three

 6  of which are pre-77s.  And I'm on the third engine for

 7  those pre-77s, and they have diesel oxidation catalysts.

 8  And so when you add it up, I'm going to need about 525,000

 9  for my match to replace those 21 buses, roughly.  And I go

10  before my school board this next Tuesday night and ask

11  them for a resolution in preparation to go to my local air

12  district to allow me to play the next round.  And I'm

13  hopeful that our -- or I'm going to just say it -- bean

14  counters will allow me to go out and finance that 525,000

15  that I'll need to match.  As in the past we've had the

16  cash flow and been able to pay that up front, we're not

17  going to be in that position.  My district cut my budget 6

18  percent this year.  I'm thankful at this point they're

19  going to keep that same base limit as I go in for

20  operations this coming year.

21           But I can tell you, I've got neighbors that have

22  4 and 5 buses, unlike my 64 -- and I've also been

23  privileged to add to my fleet going after local SEMAC

24  funds, praise God, through our Council of Governments.

25  But I've got neighbors with four or five, ten buses that

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 1  are cannibalizing buses right now because they can't

 2  afford to run their entire fleets; that they've increased

 3  walking distance.  And they're asking me how they can

 4  play.  And they can't even afford to go out and get a loan

 5  for 25,000 for a bus as their local match.

 6           So I would like to play the CNG game, as 21 of my

 7  newer buses are natural gas and I have the infrastructure.

 8  But with 140,000 cap, it's only going to be affordable for

 9  me to continue to operate diesel buses in my fleet,

10  unfortunately.

11           So I'm available for questions.  And thank you

12  for the voters for this initiative.  And we're going to

13  play it the best we can.  But I'm worried that our small

14  neighbors are going to get left out.  They won't retrofit.

15  They haven't up to this point.  Many of them have not

16  participated in other low emissions programs, simply

17  because they don't have the grant writers or the technical

18  staff to go for it.

19           Thank you.

20           CHAIRPERSON NICHOLS:  Thank you.

21           Nikki Hughes and then Kirk Hunter, Tom Carroll.

22           MR. RHOADS:  Nikki Hughes is the Transportation

23  Director for San Juan.  She had to leave for personal

24  reasons.

25           Okay, understood.

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 1           They have 210 buses there; 54 are eligible.  And

 2  she has been directed to cost-out what it would take to

 3  eliminate their whole regular school transportation

 4  program because of the proposed cost.

 5           CHAIRPERSON NICHOLS:  Thank you.

 6           Is Kirk Hunter here?

 7           Yes.

 8           MR. HUNTER:  Yes.  Good evening.  Kirk Hunter,

 9  CEO, Southwest Transportation Agency.  Just a little

10  background.

11           We're a joint powers authority in Fresno County

12  handling transportation for 14 school districts, 7,000

13  students a day, 1200 extracurricular trips, 1.2 million

14  miles a year.  We have 39 compressed natural gas school

15  buses in a fleet of a hundred.  And we have a 15,000

16  gallon liquid compressed natural gas fueling station, and

17  are partnering with Harris Ranch to bring the first

18  liquefier to the Central Valley hopefully in a couple of

19  years if we play our cards just right.

20           First, I want to talk a little bit about

21  retrofits, which I have aptly renamed glorified mufflers.

22  Last year the Southwest Transportation Agency took a grant

23  for $550,000 from the air district to put 31 mufflers on

24  our diesel buses -- on our middle-age diesel buses.  A

25  hundred ten thousand of that was used to upgrade our

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 1  electrical so we could plug these things in and buy a

 2  gloried muffler cleaning machine for $56,000.

 3           After we put the units on our buses we

 4  immediately began seeing increased electrical cost; loss

 5  of horsepower; increased fuel consumption; increased oil

 6  consumption; the requirement to regenerate them daily, not

 7  monthly like the literature and the salesman promised us;

 8  and increased payroll cost as a result of maintenance work

 9  and road calls.

10           Unfortunately for us, these retrofits have been

11  nothing short of a boondoggle.  They do not work for us.

12  And our recommendation -- my recommendation was, is, and

13  will always be not one red cent of school bus money be

14  spent on mufflers.  They need to be put in school buses.

15  Our kids in California deserve to ride on the most

16  technologically advanced, seat-belt equipped school buses,

17  not continuing to ride on old school buses with fancy

18  mufflers.

19           Secondly, as for the match.  Are you kidding?  We

20  can't even -- we're having a hard enough time paying

21  attention, let alone our bills, nowadays.  It is very

22  difficult out there with this $25,000, as John said -- I

23  have 14 rural school districts -- they're not going to be

24  able to afford for the match.  I know that's hard for some

25  people to grasp.  I realize that 25 grand is not a lot of

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 1  money to a lot of people.  But to a small school, that's

 2  looking at laying teachers off to make ends meet.

 3  Twenty-five thousand dollars is a half a teacher.

 4           So, anyway, the match needs to go away, the money

 5  needs to put -- 100 percent of the money needs to be put

 6  into school buses.

 7           And thank you very much.

 8           CHAIRPERSON NICHOLS:  Thank you.

 9           Tom Carroll.

10           MR. CARROLL:  Good evening.  Thanks for allowing

11  us to speak on this matter before you tonight.

12           Now, my name is Tom Carroll.  I represent Shasta

13  Union High School District up in northern California.

14           My district is 1900 square miles of Shasta

15  County's 3700 square miles.  And in looking at the data,

16  approximately 10 percent of the buses that you're

17  targeting for replacement -- or ten percent of the total

18  number of school buses in California which you're

19  targeting for replacement, 25 percent of the buses in my

20  county fit into that category.  We actually have 57 buses

21  that would be eligible for replacement and $4 million

22  proposed for replacements and retrofits.

23           If we used all that money for replacement, we

24  could replace almost half of those school buses in our

25  county.  In Shasta County we have approximately 220 school

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 1  buses.  So 57 of those, if we could replace half of them,

 2  we'd be half way there.  That is a much better bang for

 3  our buck as far as we're concerned.  It would allow our

 4  students to ride the best buses that are available with

 5  the most recent safety features - seat belts.

 6           When we start getting into the retrofit, if we

 7  use 25 percent of this money for retrofitting, we'll lose

 8  approximately six to eight school bus replacements in our

 9  county.  That means -- if you figure 50 students per bus,

10  that mean's there's going to be 300 students riding some

11  kind of a school bus back and forth to school next year

12  without a seat belt.  I don't think that's a very good

13  option.

14           On the $25,000 replacement match, as Kirk and

15  everybody else before me has said, although it may seem

16  like it's a very low amount, it's extremely unreasonable

17  for some of the school districts that we have.  We have

18  many school districts in my county.  There's 25 school

19  districts in my country.  And many of them, their entire

20  operating budget is less than $2 million.  That's

21  teachers' salaries, fuels, heating/air conditioning,

22  everything.  So a $25,000 match for a school bus is very

23  unrealistic in my area.

24           Also, the cap for the bus of $140,000, the most

25  recent bus that I looked at cost about $155,000 to replace

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 1  a diesel bus in my fleet.  So I don't believe that the

 2  $140,000 cap is realistic.  That would add an additional

 3  $15,000 to the district's replacement costs.

 4           As an industry, we're interested in accelerating

 5  the replacement of older equipment but allowing for the

 6  maximum emission reductions, and getting the most improved

 7  safety equipment out there on the road for the kids.

 8  That's the most important thing for us as far as we're

 9  concerned.

10           So I would respectfully request that you take a

11  look at the $25,000 match and the $140,000 cap for school

12  buses -- and I can share with you that I've been in the

13  school transportation industry for over 22 years.  My

14  school district has 23 school buses.  One of them is one

15  of the three pre-77 school buses on this list for

16  replacement.  It has almost 700,000 miles on it.  And I

17  road that bus to school.  That's the kind of shape that

18  the school transportation industry is in in California.

19  That's ridiculous.  So I respectfully request that you

20  guys reconsider the match and the cap and allow -- let the

21  local air districts take a look at that themselves.

22           Thank you.

23           CHAIRPERSON NICHOLS:  Thanks.

24           Bernie Orozco, followed by Joseph Kubsh.

25           MR. OROZCO:  Good evening, Madam Chair, Board

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 1  members.  Bernie Orozco with Sempra Energy, here today

 2  representing San Diego Gas and Electric and the Southern

 3  California Gas Company, collectively known as the Sempra

 4  Energy Utility Companies.

 5           We've been asked by school districts in our

 6  service territory -- and we have the largest natural gas

 7  distribution service territory in the United States.

 8  There's no one larger delivering natural gas to customers.

 9  A number of our school districts have come to us and asked

10  if we would make comments today basically stating

11  everything that's been said to far.

12           The cap of $140,000 does not work for most school

13  districts.  The match does not work.

14           And, also, one other issue was the retrofitting

15  of natural gas vehicles.  Folks have asked that we request

16  that for natural gas vehicles -- natural gas bus, CNG,

17  that you be allowed to replace the fuel tanks.  So another

18  consideration for you.

19           I won't belabor the points.  I think everyone's

20  been making a very good show for today.  So thank you.

21           CHAIRPERSON NICHOLS:  Thank you.

22           Joseph Kubsh, followed by Tim Carmichael.

23           MR. KUBSH:  Good evening, Madam Chair and members

24  of the Board.  My name is Joe Kubsh.  I'm the Executive

25  Director of the Manufacturers of Emission Controls

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 1  Association.

 2           Our industry provides many of the verified Level

 3  3 technologies that will be used for retrofit options as a

 4  part of this Clean School Bus Program.  And our industry

 5  certainly applauds the state's efforts to provide funding

 6  to clean up these buses.

 7           I'm here tonight though to ask you to do a bit

 8  more when it comes to the retrofit side of this program.

 9  Putting Level 3 devices in the exhaust stems for retrofits

10  on these school buses is the right thing to do because

11  it's the best available technology, provides the greatest

12  reduction with respect to diesel particulate matter.

13           But this program fails to recognize another

14  source of diesel PM on existing school buses; and, that

15  is, crankcase emissions.  Pre-2007 school bus engines vent

16  their crankcases directly to atmosphere.  And this is

17  another source of diesel PM and toxic contaminants that is

18  an exposure risk for children that ride school buses in

19  this state.  And there are technologies available to put

20  essentially filters on these crankcase systems to remove

21  essentially all of these crankcase emissions from the

22  school bus footprint.

23           There are three manufacturers that have verified

24  technologies for crankcase filters, either through ARB's

25  verification program or through the U.S. EPA's

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 1  verification program.  And it's our recommendation that

 2  the retrofit portion of this school bus -- Clean School

 3  Bus Program allow funding to include a more complete

 4  retrofit package that includes not only a Level 3 filter

 5  in the exhaust system, but a verified crankcase filter on

 6  the crankcase vents of these same school buses.  We

 7  believe that verified crankcase filters could be combined

 8  with any verified Level 3 diesel particulate filter to

 9  provide this more complete retrofit package for the school

10  bus programs.

11           These crankcase filters are very cost effective.

12  The typical installed cost is less than a thousand dollars

13  per bus.  So it represents a small incremental additional

14  retrofit cost on top of the filters that are part of the

15  retrofit program that is before you this evening.

16           So our recommendation is to please find a way to

17  include crankcase filters as a part of funding a more

18  complete retrofit package as a part of this program.  We

19  believe that the school children of California deserve the

20  cleanest ride available.

21           Thank you.

22           CHAIRPERSON NICHOLS:  Thank you.

23           I'm sorry.  My list just disappeared.

24           MR. CARMICHAEL:  Tim Carmichael.

25           CHAIRPERSON NICHOLS:  Tim Carmichael, yes.  And

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 1  then Bonnie Homes-Gen.  Thank you.  And then Fred

 2  Minassian.

 3           MR. CARMICHAEL:  Good evening again.  A couple of

 4  quick points.

 5           First of all, I appreciated the compliment from

 6  Mr. Rhoads.  But to give credit where credit is due, we do

 7  deserve credit for shining a spotlight on this problem

 8  about ten years ago and encouraging Governor Davis at the

 9  time to start putting real money towards this problem.

10           I noted in the staff presentation there was a

11  photo taken by one of our staff members at the time, Todd

12  Campbell, of that yellow bus with the black cloud behind.

13  I'm sure his attorneys will be talking to you about the

14  fact that you left off the credit for the photo.  I'll

15  talk to him about it.

16           The other issue -- the more serious issue --

17  actually before I do that, the near term, this $200

18  million money in the bond, I want to give credit to Bonnie

19  Holmes-Gen and American Lung, because among the

20  environmental advocates she really was the leader in

21  driving that piece of the bond funding.  We supported but

22  she was really the driver.

23           So to the substance before you, the Coalition for

24  Clean Air supports the staff proposal.  But we share the

25  concerns raised by Mr. Rhoads.  And I just want to

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 1  highlight a couple of the points.

 2           On the match, when we asked your staff about the

 3  match, they said, yes, there may be an issue here but

 4  they're trying to stretch the money as far as they can.

 5  And we support that.  They said that the air districts

 6  could in fact cover this match.  We agree with that.  And

 7  it's probably true that most of the big air districts have

 8  the funds to do that.  But the question is:  Will they?

 9  There's a lot of pressure on the air districts just like

10  there's a lot of pressure on the Air Board, not to mention

11  the school districts, for various funding needs.

12           So we would flag that as a very important issue

13  for this Board to consider.  And at a minimum you should

14  give the discretion to your Executive Officer to make

15  adjustments as necessary if in the early going as this

16  program is rolling out you find that it's a serious

17  problem and the districts are not -- either the school

18  districts or the air districts are not coming through with

19  that match, that, you know, the program would be adjusted

20  appropriately.

21           The second point is the alternative fuels piece.

22  And whether you look at it as a cap limitation or an

23  alternative fuels carve-out, we continue to have concerns

24  that Air Board staff see a clean diesel bus as good as

25  this standard that we should measure things against.  We

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 1  believe that today we need this agency to be seeing a

 2  clean alternative fuel vehicle as the standard that

 3  everything is geared towards.  And so if Mr. Rhoads and

 4  his colleagues from the school districts are right in that

 5  outside of the South Coast the money's just not going to

 6  cut it for an alternative fuels bus, we're concerned about

 7  that.  And that's another issue that we would urge you to

 8  urge your Executive Officer to pay close attention to,

 9  because we frankly think that this agency needs to be

10  doing more to encourage and support alternative fuels in

11  all applications.

12           Thank you very much.

13           CHAIRPERSON NICHOLS:  Thank you.

14           Is Bonnie here?

15           Yes, she is.

16           MS. HOLMES-GEN:  Good evening, Chairman Nichols,

17  members of the Board.  And I'm Bonnie Holmes-Gen.  I'm

18  with the American Lung Association of California.

19           And we've been very pleased to work with you and

20  your staff and other organizations, like the Coalition for

21  Clean Air, over the years to continue to ramp up the

22  funding available for the Low Emission School Bus Program.

23  We think it's been a real success story in terms of diesel

24  pollution reduction and improving children's health.  And

25  we're very pleased that your Board is acting quickly to

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 1  get this additional $200 million out the door and get it

 2  out to the school districts.

 3           And, you know, we appreciate the issues that have

 4  been raised about the match, and we certainly do want to

 5  get the money out to both replace buses and for retrofits.

 6  And we do hope that you'll work with the air districts to

 7  see if you can resolve some of these issues of the match

 8  funding and help identity sources of funds and help push

 9  the air districts to help provide some of this extra

10  needed funding.

11           And we also think it's going to be very important

12  for you to work hard in the outreach efforts to make sure

13  that school districts take advantage of the retrofit

14  funds.  I mean we would love to replace, you know, all the

15  school buses -- all the pre-87 school buses.

16  Unfortunately, you know, with the funds that are

17  available, I think that there's been a wise choice made

18  that we need to put a portion of these funds toward

19  retrofit so we can get emission reductions now over a

20  large number of buses.  And those retrofits are going to

21  be needed to comply with your on-road truck and bus rule.

22  So I do think it's important that you do put effort into

23  the outreach to make sure that school districts take

24  advantage of these retrofit funds and are able to use

25  those monies in advance of the requirements that are

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 1  coming down.

 2           We do encourage staff to continue to investigate

 3  the problem of crankcase emissions.  We have a very

 4  helpful discussion with staff about this issue and some of

 5  the technologies they're looking at.  It sounds like

 6  there's more work to be done.  And we do want to ensure

 7  that you keep looking at this issue and how we can resolve

 8  this.

 9           And, finally, we hope we can work with you to

10  identity additional funds, so that we can finish the job

11  of replacing all these pre-87 buses.  It's very important

12  for our children's health.

13           Thank you for your attention, and we support the

14  proposal.

15           CHAIRPERSON SAWYER:  Thank you very much.

16           Fred Minassian.

17           MR. MINASSIAN:  Thank you, Madam Chair and

18  members of the Board.  Fred Minassian from South Coast

19  AQMD.

20           I would like to make a statement on behalf of our

21  agency that we do support ARB's proposal for the

22  Lower-Emission School Bus Program.

23           We have been very proactive in implementing this

24  program since Year 2000.  And the slide that was put there

25  a few minutes ago by your staff that 3500 buses have been

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 1  retrofitted to date, I'm proud to say that approximately

 2  2600 of those buses have been done within our district.

 3  We have paid the entire cost of the retrofits of those

 4  buses.  Practically every bus owned by public school

 5  districts that are 1994 and newer qualifying for retrofit

 6  have been retrofitted.  We have provided over 600 new CNG

 7  buses and some lower-emitting diesel buses to school

 8  districts.

 9           So what we are supporting -- and I would like to

10  make a clarification.  It is true that schools are going

11  through hard times.  But at least within our air district

12  we would like to keep our flexibility.  We have maintained

13  and -- established and maintained good working

14  relationships with our local schools.

15           To date, we have spent about $120 million since

16  Year 2000 on the Lower-Emission School Bus Program.  A

17  large sum of that has been from our local funds due to our

18  own Chairman's initiative and our Board's initiative.  In

19  cases where infrastructure has been needed that the ten

20  percent hasn't been enough, we have provided additional

21  funding for building infrastructure for those buses.  And

22  in cases where schools have been in real difficulty, we

23  have tried to work with them to take advantage of the

24  trading opportunity of buses where newer buses could be

25  traded to other schools and then the other schools could

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 1  replace their older buses.

 2           So it's true that schools are going through hard

 3  times.  But we are supporting ARB's proposal.  We believe

 4  we can continue working with our local schools in cases

 5  where our funding is needed to be provided.  And the

 6  program has been a success and we would like to support

 7  the program.

 8           Thank you.

 9           CHAIRPERSON NICHOLS:  Thank you very much.

10           That concludes the list of witnesses that I had.

11           I want to take it back to the staff to provide

12  just some comment on that and then to answer Board member

13  questions.

14           Do you have any additional comments based on the

15  testimony?

16           If not, then we'll go to the Board.

17           Supervisor Hill.

18           SUPERVISOR HILL:  I think Ms. D'Adamo wanted to

19  say something.

20           CHAIRPERSON NICHOLS:  Oh, sorry.

21           SUPERVISOR HILL:  Go ahead, Ms. D'Adamo.

22           BOARD MEMBER D'ADAMO:  I was just going to move

23  adoption and include some of the suggestions that Tim

24  Carmichael brought up regarding giving the Executive

25  Officer the discretion on the match and some of these

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 1  other issues.

 2           CHAIRPERSON NICHOLS:  I think that would be

 3  helpful.

 4           SUPERVISOR HILL:  Yeah.  And that's really what I

 5  was going to say too.  I think it's critical -- and these

 6  school districts are really suffering now.  And if we

 7  can -- and the match especially, but also on the cap.  I

 8  think there needs to be some consideration.  It would be

 9  nice if we could look at the alternative fuel issue.

10           But, you know, you'll be giving one -- they're

11  going to pay in two areas.  One is the match, and then

12  they're going to spend an extra 15, $20,000 or more on the

13  above the cap, because they certainly can't purchase a bus

14  for that.  So I don't know how we can either raise the cap

15  somewhat to compensate for that.  But I'd like to see us

16  do that actually.

17           CHAIRPERSON NICHOLS:  I think the tension that

18  has bothered me about this program and all the Moyer

19  programs is that, you know, we want to be out there

20  supporting the shift to alternative fuels and upgrading of

21  all the vehicles in the State of California, but at the

22  same time kids riding the buses today are breathing

23  unacceptable levels of particulate matter.  It's not just

24  what they're doing to the air basins; it's what they're

25  doing to the children inside those buses.  And

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 1  retrofitting is a lot faster.  Even though I heard the

 2  comment from the guy who said he would never retrofit

 3  anything, that's just not been the experience of other

 4  areas.  And so I guess we have to have some sort of a

 5  fairness about these approaches.  But we're going to get

 6  the money to go a lot faster and farther in terms of

 7  actually reducing health risks, I think, if we put this

 8  into -- primarily into the retrofits, even though that's

 9  not what the districts want.  And I understand they

10  don't -- and, believe me, I don't think that they've been

11  getting what they need in terms of upgrading their fleets.

12  But this one program is a little bit of a stopgap.  It's

13  not the whole answer, unfortunately.

14           BOARD MEMBER BAUMS:  I was just going to echo

15  your concern about the air the kids are breathing on

16  school buses.  It's been studied.  It's bad, and has

17  immediate health effects especially for kids with asthma.

18           So I understand the tension that you described.

19  And I do support trying to do something to alleviate the

20  financial burden on, you know, very hard pressed school

21  districts with both the cap and the match, but I do think

22  we have to have some provision for retrofits as well.

23           CHAIRPERSON NICHOLS:  Well, I'm particularly

24  happy to hear that the South Coast has been doing such an

25  aggressive job with their own funding of making that a

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 1  priority.  And I hope other districts will do the same

 2  thing.

 3           All right.  We had a motion.

 4           Do we have a second?

 5           BOARD MEMBER BAUMS:  I'll second it.

 6           CHAIRPERSON NICHOLS:  All right.

 7           SUPERVISOR HILL:  They had one other question

 8  that was raised.  And if I -- and that's related to the

 9  certification issue -- the CHP certification, that it has

10  to be current.  And I guess it -- I know the Bay Area

11  district raised the issue that some buses perhaps are

12  in -- you know, they've been out of service for six months

13  or a year being retrofitted or worked on themselves.  And

14  if maybe there could be, if they've been in service for

15  the last year or two of three or something like that.

16           ON-ROAD CONTROLS BRANCH CHIEF KITOWSKI:  Right.

17  This issue's come up at the Bay Area and the South Coast,

18  where we put a cutoff point in there.  And this was

19  basically to protect the state program.  At some point we

20  just drew a line and said this is the point at which you

21  need a CHP certificate.  It's got to be valid from that

22  point on.  And the reason for doing that, when we went to

23  the point where we were saying we want to -- we were going

24  to pay completely the cost of the pre-77s, we heard

25  comments from both school districts and air districts,

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 1  "Well, what if I bring some back from the junkyard and

 2  revive them?"  And that is completely the opposite

 3  direction we were trying to go.

 4           The two places where they appear that they may

 5  have, you know, legitimate cases where a bus might have

 6  been undergoing some refurbishment or something for an

 7  extended period, we're both -- the Bay Area and South

 8  Coast, both of which have quite an extensive amount of

 9  motor vehicle fees, and we encourage them to use their

10  motor vehicle fees, we're talking probably about, you

11  know, two or three buses at the most.  And we just -- we

12  were concerned about the risk to this overall state

13  program.

14           SUPERVISOR HILL:  Okay.  That's fine.

15           Thank you.

16           CHAIRPERSON NICHOLS:  Thank you.

17           Yes, Board Member Berg.

18           BOARD MEMBER BERG:  Point of clarification.

19  On the motion we are going to give the Executive Director

20  the latitude of being able to take a look on a

21  case-by-case basis not only cap but also the matching?

22           CHAIRPERSON NICHOLS:  Yes, we are.  And use that

23  power well.

24           All right.  Will all in favor of the resolution

25  please say aye.

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 1           (Ayes.)

 2           CHAIRPERSON NICHOLS:  Any opposed?

 3           Great.  It carries unanimously.

 4           We're not done yet, however, folks, because we

 5  have an open comment period at every Board meeting.  It's

 6  a time when anyone who's here is allowed to comment on any

 7  topic that they wish to for the Board, that's relevant to

 8  the ARB's jurisdiction anyhow.

 9           And with that, I'm going to call forward the

10  people who've signed up to speak to us.  They are Doug

11  Korthof, Gary Rohman, William Davis, Henry Hogo, Fred

12  Minassian, and Francois Choquette, we think.

13           EXECUTIVE OFFICER GOLDSTENE:  Madam Chairman, do

14  you want to talk about the ZEV?

15           CHAIRPERSON NICHOLS:  Yes, we do want to put up

16  the sort of simplified version of what the Board adopted.

17           EXECUTIVE OFFICER GOLDSTENE:  Do you want to do

18  that now before --

19           CHAIRPERSON NICHOLS:  Before the public comment

20  period?

21           EXECUTIVE OFFICER GOLDSTENE:  It's up to you.  I

22  just wanted to make sure --

23           CHAIRPERSON NICHOLS:  Well, nobody's -- I don't

24  know that it's going to make any difference actually.  Why

25  don't we just get through the public comment.

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 1           Go ahead.

 2           MR. MINASSIAN:  People are waiting for that.

 3           CHAIRPERSON NICHOLS:  All right.  Well, then

 4  let's do it.

 5           All right.  Never mind.  If you don't mind

 6  sitting down, let's just quickly -- we have a slide I

 7  believe that we can put up, and we'll have a brief

 8  discussion.

 9           Thank you.

10           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  We

11  tried to capture the essence of the Board's decision in

12  this two-page Word document here.  And it's been handed

13  out to the Board members.  And what we hope is that if --

14  we could either go through it.  Or if you've read it and

15  you think it captures the essence, then we could make that

16  available to the public, put it on our website.  And we've

17  labeled it "preliminary" because there wasn't a great

18  amount of wordsmithing going into it.  But I think we

19  caught the essence.  And we'd kind of like your

20  confirmation that that's the case.

21           CHAIRPERSON NICHOLS:  Can you see it on your

22  screen?

23           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Yeah,

24  you've got hard copies there as well.

25           CHAIRPERSON NICHOLS:  Great.

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 1           SUPERVISOR HILL:  Madam Chair, I'd just like to

 2  add one on the redesign.  I know we made it clear, and I

 3  just wanted to make sure just for staff, that the redesign

 4  the ZEV program by the end of 2009, perhaps we could

 5  include that in some statement that we're making, because

 6  that was I think the desire.

 7           BOARD MEMBER SPERLING:  You know, just a little

 8  comment on this is that, you know, the way this is

 9  presented with the 7500 number, it's really coming out of

10  a mind-set from the alternative fuel compliance path.  And

11  having just sat with a bunch of reporters and gotten --

12  you know, there's a different way of presenting this.  And

13  it could just as easily be presented as 12,500 battery EVs

14  or 7500 fuel cell vehicles.  And, you know, the battery

15  EVs could be bolded just as well in terms of how we

16  present this.

17           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  In

18  other words -- I mean you did see the parentheticals below

19  it that has the numbers, right?

20           BOARD MEMBER SPERLING:  Well, I'm saying the

21  parentheticals could --

22           CHAIRPERSON NICHOLS:  Yeah.  But that's like an

23  alternative to the 7500.

24           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  And if

25  we did that, then I probably should add the numbers that

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 1  would go with the 25,000 too, because there'd be a range

 2  there as well.

 3           BOARD MEMBER SPERLING:  So they could be --

 4  probably the best way is actually just say they're all

 5  equal, which is a more accurate way of presenting it.  You

 6  know, it's this or this or this.  And not necessarily

 7  bolding any one of them.

 8           CHAIRPERSON NICHOLS:  So under the gold category

 9  you'd have three equal-sized or equally bold numbers?

10           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Right.

11           CHAIRPERSON NICHOLS:  The 7500, the 5,357, or the

12  12,500?

13           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Yeah,

14  under the 25,000 would say 25,000 or 17,857 fuel cell --

15  long-range fuel cell vehicles or 41,667 battery electric

16  vehicles with 100-mile range.  That way?

17           CHAIRPERSON NICHOLS:  Uh-huh.

18           BOARD MEMBER D'ADAMO:  I would just also suggest

19  that under silver plus, most people don't know what that

20  means.

21           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Yeah,

22  we should -- we'll put in assuming 22-mile plug hybrid

23  electric vehicle.  Would that do it for based on a --

24           CHAIRPERSON NICHOLS:  Otherwise I think the

25  specific -- the discussion of the specific changes that

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 1  were made is accurate as far as I can tell.

 2           EXECUTIVE OFFICER GOLDSTENE:  Madam Chairman, we

 3  want to clarify that on the redesign we'll add language to

 4  bring it back to the Board by the end of 2009.  And also,

 5  just so you understand, that that would affect -- what

 6  we're looking at is that would affect model year vehicles

 7  2015 onward.  I just wanted to make sure that that's your

 8  understanding as well.

 9           CHAIRPERSON NICHOLS:  Yes.

10           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  You

11  weren't going to try to revisit 2012 through 14 by the

12  redesign, but just prospectively beyond that.

13           CHAIRPERSON NICHOLS:  Yes, from 2015 on, right.

14           And --

15           SUPERVISOR HILL:  I'm sorry.

16           CHAIRPERSON NICHOLS:  Sorry.

17           SUPERVISOR HILL:  Just a question on the credit

18  banks of manufacturers fully transparent.  You know, that

19  was -- 2010 was the suggestion in the recommendation, but

20  2009 was the -- you know, the production data.  And I

21  guess I never really got an answer.  And I know we're not

22  discussing the issue again, but why we can't make that

23  2009 as well for the credit bank distribution, the

24  transparency of that number as well.

25           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  And I

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 1  thought that -- I'm not sure I remember why it went to --

 2  why the reason for the --

 3           CHAIRPERSON NICHOLS:  We didn't do that when it

 4  came up the last time, and there was a reason.  But I'm

 5  trying to remember what it was.

 6           SUPERVISOR HILL:  But I thought when we were

 7  talking today we were planning to make it all at one time,

 8  and I thought it was 2009 that we agreed to, though it's

 9  not --

10           CHAIRPERSON NICHOLS:  You mentioned it, but we

11  had already, I think --

12           SUPERVISOR HILL:  But that wasn't your

13  understanding?

14           CHAIRPERSON NICHOLS:  No, it was not, it was not.

15           SUPERVISOR HILL:  Okay.  That's fine.

16           Thank you for the clarification.

17           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  So it's

18  okay as written then or --

19           CHAIRPERSON NICHOLS:  On that point I think it

20  is.  I think if you're going to put this out and you want

21  to mention the nine loopholes, it was the nine specific

22  loopholes that were recommended or were identified by UCS

23  and NRDC.  That was where that came from.

24           BOARD MEMBER SPERLING:  I'm not sure loopholes is

25  the -- I mean that's the word they used.

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 1           EXECUTIVE OFFICER GOLDSTENE:  We'll work on

 2  language to clarify it.

 3           CHAIRPERSON NICHOLS:  They're issues.

 4           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:

 5  Because, by the way, we have gone over those and we don't

 6  consider any or just a few as even bordering on loopholes.

 7           CHAIRPERSON NICHOLS:  Okay.  Well, then let's not

 8  call them loopholes even if they did.  But you need to at

 9  least get back to us, I guess, and let us know what you've

10  decided.

11           MR. CARMICHAEL:  Chairman Nichols?

12           CHAIRPERSON NICHOLS:  Uh-huh.

13           MR. CARMICHAEL:  Just a quick clarification.  If

14  this is intended to capture what the Board did, I thought

15  the other piece of this was action on the intermediate

16  manufacturers.

17           CHAIRPERSON NICHOLS:  Yes, that's on Page 2.

18           MR. CARMICHAEL:  Oh, we couldn't see that.  We

19  don't have a hard copy.

20           CHAIRPERSON NICHOLS:  Sorry.  It's page 2 of the

21  slide.  Yeah, it's there.

22           That's what we were -- when we were talking about

23  the issues or the loopholes, that's also on page 2.  So

24  you can give everybody a chance to look at it.

25           BOARD MEMBER SPERLING:  And, you know, the other

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 1  one is on the additional credit for the plug-in hybrids

 2  meeting the US 06 cycle.  I think -- I had suggested up to

 3  3/10 -- you know, 2.4 up to 2.7.  I'm not saying it should

 4  be that.  But it says here one or two-tenths of a credit.

 5           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  I was

 6  thinking it was 2.5 was the base.  But it's 2.4, you're

 7  right.

 8           So one to three-tenths of a credit?

 9           BOARD MEMBER SPERLING:  Yeah.

10           MR. CARMICHAEL:  One other quick question.  Would

11  it be possible to get a hard copy of this?

12           CHAIRPERSON NICHOLS:  Of course.

13           MR. CARMICHAEL:  Or what's the intention for

14  communicating this?

15           CHAIRPERSON NICHOLS:  Well, we've got to clean it

16  up and distribute it.  But we were going to put copies out

17  as soon as they were ready.

18           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  We'll

19  readjust it and it will be on the website tomorrow morning

20  or mid-morning maybe.

21           CHAIRPERSON Nichols:  This is a summary.  The

22  resolution will be more grandiose.

23           EXECUTIVE OFFICER GOLDSTENE:  Without the word

24  "loophole."

25           MR. KORTHOF:  Excuse me, if I might ask.  On the

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 1  first page it had an either/or on two boxes, the 7,500

 2  versus the 25,000.  What does that -- does that mean the

 3  25,000 is one pathway that they could use?

 4           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Right.

 5  It was an attempt to say that if you wanted to make all

 6  fuel cell or battery electric or long-range fuel cell

 7  vehicles, it would be 25,000 or these other two numbers

 8  that reflect the credit rule.  Or in the other extreme,

 9  you could make only 7500 but you'd have to make the 58,000

10  silver plus vehicles.  It boxes the two possible outcomes.

11           MR. KORTHOF:  So this would require then at least

12  some fuel cell or battery cars during that period?

13           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Yes, it

14  would require anywhere from 5357 to 12,500 of those

15  vehicles.

16           MR. KORTHOF:  And would they have to be sold or

17  could they just be placed?

18           That issue wasn't dealt with?

19           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  I

20  believe it has.  I think it's --

21           CHAIRPERSON NICHOLS:  -- sold.

22           MR. KORTHOF:  It would have to be sold?

23           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Well,

24  it's placed.  I don't know if it says sold or leased or --

25  I'm not sure actually.

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 1           BOARD MEMBER SPERLING:  The language used to be

 2  "made available for sale."  I don't know if it's still

 3  that language, but --

 4           MR. KORTHOF:  We wouldn't expect the fuel cells

 5  to be available for sale because they're much too

 6  expensive.  They'd have to be on a lease.  But with

 7  battery electric cars, they would have to be offered for

 8  sale to be meaningful.  Otherwise they get taken back and

 9  crushed.

10           MR. FRIEDLAND:  I'm sorry.  I had one other

11  question too.

12           On that 25,000, does it have the same caveat in

13  terms of scaling?  How did the different types fit into

14  that 25,000?

15           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  The

16  number for a long-range fuel cell vehicle is 17,857.  Is

17  that what you're talking about?

18           MR. FRIEDLAND:  Exactly.

19           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  And the

20  number for a battery electric 100-mile range is 41,667.

21           MR. FRIEDLAND:  That's still pivoted on five?

22           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Yeah,

23  it's still pivoted on five, right.

24           Could you introduce yourself for the court

25  reporter.

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 1           CHAIRPERSON NICHOLS:  For the court reporter.

 2           MR. FRIEDLAND:  Jay Friedland from Plug In

 3  America.

 4           CHAIRPERSON NICHOLS:  We know you but the record

 5  doesn't.

 6           Yes.

 7           BOARD MEMBER D'ADAMO:  Maybe to put an asterisk

 8  on that 25,000 number, because -- I don't know how to

 9  capture this, but that's not going to happen.  There's

10  going to be something in between.  It could either be the

11  minimum of a combination of 75 or 53 or 12 plus the silver

12  plus.  Or their possibly could be more gold and less

13  silver, depending on what the choices are.  But we don't

14  expect that there would be 25,000 gold and zero silver.

15  That's what theoretically could occur.

16           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  That's

17  an option for the --

18           BOARD MEMBER D'ADAMO:  Some way to capture that.

19           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Yeah,

20  each manufacturer chooses.  So I -- it is possible, I

21  guess, but we don't think it's probable.

22           CHAIRPERSON NICHOLS:  I agree, we don't think

23  it's likely.  But that's what the rule calls for.

24           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Well,

25  with your permission, we'll look at this table and see if

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 1  there's a way to perhaps more clearly -- but, like

 2  Professor Sperling, the few people I've been talking to,

 3  it's hard to convey it clearly to people.  But we could

 4  try it.

 5           SUPERVISOR HILL:  And, Tom, when you do this

 6  tomorrow, when you put it on the website, could you e-mail

 7  it to all of us?  That would be great.

 8           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Sure.

 9           SUPERVISOR HILL:  Thank you.

10           CHAIRPERSON NICHOLS:  It's the compliance path, I

11  guess, is what I would call it.

12           MR. KORTHOF:  I would really feel more

13  comfortable if it would be a footnote saying that any

14  battery electric car would have to be offered for sale.

15  Because if it doesn't say that, wouldn't necessarily do

16  it.

17           CHAIRPERSON NICHOLS:  We need to look at the

18  language in the basic rule if that's not a -- I mean

19  whatever it is, it should stay what it was unless we bring

20  it back and fix it.

21           MR. KORTHOF:  This goes back to the 1996

22  Memorandum of Agreement.  And at that time it was regarded

23  as a substitute for the ZEV mandate that they would put

24  out a demonstration program.  And at that time it was

25  stated that this would just be a placement.

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 1           CHAIRPERSON NICHOLS:  Right.  That's clearly not

 2  what the Board intends.  But let's call out the

 3  language --

 4           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Well,

 5  we'll look at that.  And if it's not -- if we propose it

 6  like we did in the past, we'll just put that on the 15-day

 7  list if's that's your preference.

 8           CHAIRPERSON NICHOLS:  We'll either clarify it or

 9  fix it in the 15-day period.

10           You understand the point?

11           BOARD MEMBER BERG:  But if it's drastically

12  different, I do think that we can't alter anything without

13  a discussion either with -- with everybody.  We can't do

14  after the fact.

15           CHAIRPERSON NICHOLS:  We're not going to rewrite

16  the whole program.

17           BOARD MEMBER BERG:  No.  But I mean if it states

18  one thing now, we can't -- if it states that you only have

19  to lease them, I don't think you can go till you have to

20  sell them without a discussion.

21           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  That's

22  up to you, I think, how much leeway we should have on the

23  15-day.

24           MR. KORTHOF:  It is a very significant issue,

25  because when they first did this they didn't represent

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 1  that they would make leases that couldn't be converted

 2  into sale.  They just misrepresented it.

 3           BOARD MEMBER BERG:  I agree.  I just think that

 4  you have to honor the process.  That's all I'm saying, is

 5  you need to honor the process.

 6           So why don't you take a look at it.  Let's not

 7  get worried about what maybe isn't a problem.  But I think

 8  it's very important that you honor the process.

 9           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Does

10  Legal want to opine on our --

11           CHIEF COUNSEL JENNE:  Well, I was just about to

12  say that this is most -- these are the changes the Board

13  did.  So like Chairman Nichols just said it shouldn't --

14  whatever the rule said before should still be the same

15  even though it's not reflected on this chart on the

16  screen.  But I think during the 15-day comment period if

17  there is some ambiguity in what we -- in the way it's

18  worded, we can fixed that.  We wouldn't be inventing a new

19  direction without any discussion.

20           CHAIRPERSON NICHOLS:  Are we okay?

21           Okay.  We're done with that item.

22           EXECUTIVE OFFICER GOLDSTENE:  Yeah, I think

23  that's it.

24           CHAIRPERSON NICHOLS:  Okay.  So now it just --

25           EXECUTIVE OFFICER GOLDSTENE:  We'll clean it up

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 1  and redistribute it.

 2           CHAIRPERSON NICHOLS:  Okay.  Thank you.

 3           We'll hear the public comment then, which is not

 4  directed to anything that we can take action on right now.

 5  But this is for general comment.

 6           So general comment, three minutes.  You're on.

 7           MR. KORTHOF:  Thank you.

 8           I wanted to explain to you something of why

 9  people get involved in electric cars and why their

10  passions are so strong.  The first time I went to a CARB

11  meeting was in 1994.  I went because the Orange County

12  Register wrote that the Californians Against Higher

13  Taxation was appearing there.  And I thought that they

14  were trying to argue against subsidies for oil-based cars.

15  So I was going there prepared to thinking, well, I'm with

16  them.  You know, we're going to stop all these oil-based

17  cars and have electric cars.

18           Turns out that they were arguing the other way.

19  And, in fact, they were arguing in a -- they wouldn't let

20  me speak.  You know, I had to fight to even talk over

21  their comments.  They were arguing that electric cars were

22  the hidden taxation.  And I'm curious about why this

23  became such a big issue.

24           And, finally, after the Memorandum of Agreement

25  and electric cars became available, you know, I finally

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 1  drove in one, a Honda EV.  And I thought, you know, this

 2  is great.  I had no experience with electric cars at all.

 3  But it had this gliding power and, you know, it drove just

 4  like a regular car.  It had 120 miles range.  And it could

 5  carry things.  It carried tools and construction

 6  equipment.  And it was wonderful.

 7           And I had a horrible time getting it and keeping

 8  it from Honda.  And then we had the horrible experiences

 9  with General Motors and all the other companies.

10           But in 2000, you know, what happened was there

11  was the energy so-called crisis, which we know was foisted

12  by FERC on California, money was stolen from us, $38

13  billion.  But we felt guilty driving an electric car.  So

14  we put in a solar system on our roof.

15           All of a sudden it all clicked.  And people that

16  were like me at the same time, and many did, feeling

17  guilty, they put in a solar system and produced more

18  energy than they used.  And they got into this mind-set

19  of, "Well, I'm making my own power.  I'm empowering

20  myself.  And I'm using this power to drive with."  And if

21  I need eventually or once in a while I need to take an

22  airplane or drive a rented car or rent a truck or have a

23  third gas car or something, still on my normal daily

24  routine when I was driving to work I drove on this energy

25  that I made myself.

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 1           And this combination of effects is something that

 2  is -- once you understand it, it's something that really

 3  just -- it grabs your heart and you really want to do it.

 4  And the most astounding thing was that the money we saved

 5  from not buying gasoline with many thousands of miles when

 6  I drove to work every day more than paid for our solar

 7  system in three years.  We avoided cost of gasoline, you

 8  know.  And it turns out to be significant.  It will nickel

 9  and dime you to death.  But, you know, you buy the solar

10  system and you put up the money and don't have to buy

11  gasoline and you pay off the solar system in three years

12  or less.  And that's the key idea that brings people to

13  empowerment.  People say, "I want to do this.  How can I

14  possibly do this?"  All we have to have is electric cars

15  for sale.  If we can have a plug-in car that people could

16  buy, you know, that would make solar power self-financing.

17           CHAIRPERSON NICHOLS:  Thank you.

18           MR. KORTHOF:  You wouldn't even need subsidies to

19  do it.

20           CHAIRPERSON NICHOLS:  We hear you.  Thank you.

21           MR. MINASSIAN:  I wanted to explain that to you

22  and understand why people are willing to wait in the rain

23  for 28 days with the chance of buying even one.

24           Thank you.

25           CHAIRPERSON NICHOLS:  We appreciate that.  We do

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 1  understand the enthusiasm, and hope it gets more widely

 2  spread.

 3           All right.  Gary Rohman, William Davis.

 4           MR. ROHMAN:  Yeah, I've got a statement I'd like

 5  to make.  And it's longer than three minutes, so Bill

 6  Davis is going to take over when I leave.

 7           Good evening, Chairman Nichols and the Board

 8  members.  My name is Gary Rohman.  I come before you today

 9  to address a matter that is not on today's agenda per se,

10  but one that is important enough that I felt compelled to

11  share my industry's thoughts and concerns about the

12  off-road diesel regulation.

13           I currently serve as Chairman of the Construction

14  Industry Air Quality Coalition, also known as CIAQC.  When

15  I'm not working on air quality issues with my coalition

16  members, I am Vice President of ECCO Equipment

17  Corporation.  ECCO was founded over 40 years ago, and our

18  corporate office is in Santa Ana in southern California.

19  We also have a regional office in Visalia and equipment

20  yards in Stockton and Sacramento.  We own over 600 pieces

21  of construction equipment and rent this equipment out to

22  contractors, both small and large, that work up and down

23  the golden state.

24           My goal today is to let you know that CIAQC

25  continues to work diligently on issues surrounding the

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 1  implementation of the off-road regulation.  For example,

 2  you heard earlier today from others representing the

 3  construction industry about the Carl Moyer Program, about

 4  how successful it has been in providing early

 5  cost-effective and voluntary emission reductions over the

 6  past decade.

 7           Unfortunately, access to this program is being

 8  taken away from us.  That is, we are no longer eligible to

 9  receive monies from it because of the off-road rules

10  adoption.  And that's something that we deeply regret.

11           As you well know, CIAQC and its members have

12  worked tirelessly over the past three years to provide

13  your staff with input on the development of the off-road

14  regulation.  We have offered our perspectives and

15  knowledge of how the construction industry works.

16  Collectively we have spent thousands of hours reviewing,

17  examining, considering, and developing data and compiling

18  information for the Board and staff of the Air Resources

19  Board.

20           Since the beginning of this year, we have

21  provided three comment letters on the regulation,

22  including the SOON program.  To this end, we believe

23  staff's analysis did not adequately examine the real costs

24  of the regulation.  The estimate of the used equipment

25  market is flawed, painting a much rosier picture and

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 1  overstating the future availability of Tier 3 equipment

 2  that will be necessary to comply with the regulation.

 3  This will have a huge impact on the ability of equipment

 4  owners to acquire cleaner equipment.

 5           And please keep in mind, Tier 3 engines for the

 6  175 to 750 horsepower only entered the marketplace in

 7  2006; engines for the 100 to 175 horsepower, in 2007; and

 8  engines for 75 to 100 horsepower, in 2008, not a long

 9  period of time.

10           The regulation now includes the SOON program.

11  This is an entirely new regulation.  It was included

12  during the eleventh hour of the rule development process

13  without the ability of the regulated community to review

14  staff proposal or comment on the economic impacts that it

15  will have on the industry in advance.

16           CHAIRPERSON NICHOLS:  Okay.  Now you can switch

17  horses.

18           MR. ROHMAN:  Since its adoption -- let me just

19  finish.  Since its adoption we have been deeply involved

20  in its possible implementation, working both the South

21  Coast AQMD and San Joaquin Valley Air Pollution Control

22  District on how to do this.

23           CHAIRPERSON NICHOLS:  It's like the Pony Express.

24  You hand it off to the next --

25           MR. DAVIS:  Fast riders.

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 1           Unfortunately, the SOON program is not ready for

 2  prime time.  Staff has still not provided an adequate

 3  analysis of the SOON regulation and its effects.  In the

 4  staff's own April 2007 initial statement of reasons for

 5  this regulation, they said, "Staff considered requiring

 6  higher turnover rates and more stringent NOx averages.

 7  But the higher cost would likely be more than the industry

 8  could bear."

 9           It's turning out to be exactly the case with

10  SOON.  We believe the SOON program is well intentioned.

11  It was initially envisioned and sold to us as a voluntary

12  program to get additional emissions reductions above and

13  beyond those required by the new rule.  In order for it to

14  work, it still must be voluntary.  It is no longer that

15  today.

16           And it must be fully funded.  You've heard the

17  situation our industry is in, with 47 percent drop in

18  revenues in the construction industry over the last three

19  years.  We can't contribute any more.  And the SOON

20  program is one of the areas where we can't.

21           Chairman Nichols, you said you hadn't heard much

22  about particulate filter failures.  We're now engaged in

23  putting particulate filters on construction equipment.  I

24  had a conversation with Sean Daly earlier today about

25  this.  We're finding that they have four-hour duty cycles

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 1  on our equipment, not even a full day's work.  And our

 2  industry usually works 16 hours.  We really need to

 3  revisit the question of V-DEC applicability in our

 4  industry.

 5           At the end of the 18th CENTURY and the beginning

 6  of the 19th Century the British Army was engaged in an

 7  incredible war with the French.  Then Napoleonic wars

 8  brought forward a special unit in the British Army called

 9  the Forlorn Hope.  This unit's job was to provide

10  skirmishers before the army advanced or to cover the

11  retreat of the army in case something bad happened.  Gary

12  and I tonight are the forlorn hope of the construction

13  industry.  We hope that in the one week left before this

14  regulation goes to the Office of Administrative Law that

15  this Board will ask staff to pull the SOON program out of

16  the off-road diesel rule.  It is not ready and it is not

17  going to work.  It could.  It could.  But not the way it's

18  currently constituted.

19  Thank you all very much for your patience with us and for

20  your service tonight.

21           CHAIRPERSON NICHOLS:  Thank you for staying with

22  us and for your very cogent comments.

23           We couldn't, I don't think, take action without

24  notice at this point even if the Board was so inclined.

25  But I do want to -- I hear your comment, and you're not

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 1  the first person who has mentioned to me, at least, their

 2  concerns about the way the SOON program has been developed

 3  since it left our hands.  And so I do want to ask the

 4  staff to look into it and to -- if they can't take action,

 5  at least to give us some thoughts about what we might be

 6  able to do to acknowledge the problems that have been

 7  raised here.  Because we are -- we don't want to be party

 8  to a program that also breaks the backs of the people that

 9  we're trying to get to clean up here.

10           And, again, you know, I can't comment without a

11  full range of facts.  We haven't heard from the South

12  Coast about, you know, what they're doing.  But we do want

13  to look into it.

14           EXECUTIVE OFFICER GOLDSTENE:  We'll get back to

15  you very quickly about the status.  We can't stop the

16  regulation because that will kill the regulation.  But

17  we'll come back to you with information about other ideas.

18           MR. DAVIS:  We were under the impression that

19  during the public comment period the staff had the ability

20  to make changes in the regulation and in fact has made

21  changes in the regulation --

22           CHIEF COUNSEL JENNE:  I think I can clarify that.

23           We could during the period put out a 15-day

24  notice, but there isn't enough time left to do that.

25  There isn't enough time to change the program, put it out

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 1  for public comment, and get everything to OAL in the one

 2  week that's remaining.  So at this point there isn't any

 3  option other than to just say we're not going to file the

 4  entire program with the Office of Administrative Law and

 5  have it -- and have to start all over again from square

 6  one.

 7           CHAIRPERSON NICHOLS:  The repercussions of that I

 8  think would not be acceptable, given what we went through.

 9           MR. DAVIS:  We are hearing that you are

10  considering the possibility of amendment to this program

11  already, perhaps even later this year.  If that's the

12  case, then this might be one of those areas that we should

13  visit immediately on the questions of amendment.

14           BOARD MEMBER BERG:  And don't forget we do have

15  on the calendar the technical review.  And I saw it on the

16  calendar for December.  And so that will be an important

17  milestone as well.

18           MR. ROHMAN:  We really need your help.

19           CHAIRPERSON NICHOLS:  Okay.  Henry Hogo and then

20  Fred Minassian and Francois Choquette.

21           MR. HOGO:  Good evening, Madam Chair, members of

22  the Board.  Henry Hogo, the Assistant Deputy Executive

23  Officer of our Mobile Source Division at South Coast AQMD.

24           I actually wasn't going to comment on the SOON

25  program.  But since it's been brought up, we are moving

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 1  forward with our program.  We have a program announcement

 2  that closes on May 2nd actually.  And we actually have

 3  fleets that are interested in participating.  We talked to

 4  construction company fleets.  And we actually talked to

 5  close to 30 fleets about participation and working with

 6  them on how to do the compliance plans.

 7           One fleet actually said, "We can use all $30

 8  million."  And we said, "If you can get us our three tons

 9  this year, then we're set for this year."  But we do need

10  to move ahead with this program.

11           My comment is actually in reference to Mr.

12  Carmichael's comment earlier about a meeting between Dr.

13  Wallerstein and Mr. Goldstene.  And I just want to point

14  out that -- expand a little bit on that.  And this is in

15  regards to the comments made last month relative to the

16  LNG truck projects under Proposition 1B funding.  And as

17  you recall, there was a commitment to work together to see

18  how we can facilitate these cleaner trucks.

19           And, however, the proposal that staff has made to

20  date seems to make it more difficult.  And we believe that

21  it may be inconsistent with the criteria that's been set

22  forth in SB 88 and the Carl Moyer Program.

23           So we do want to work your staff, and Mr.

24  Goldstene has committed to work with Dr. Wallerstein.  And

25  we hope to get this meeting going very quickly because

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 1  the -- we have to resolve this since the deadline is April

 2  4th.  So I just want to make that comment.

 3           And Mr. Minassian will waive his comment.

 4           CHAIRPERSON NICHOLS:  Okay.  Thank you.

 5           Is Francois Choquette here?

 6           BOARD MEMBER BERG:  Could I just make one quick

 7  comment.

 8           CHAIRPERSON NICHOLS:  Sure.

 9           BOARD MEMBER BERG:  On the SOON program, that

10  does show us that the voluntary part of it for 2009 is

11  working.  And so as we can continue to work with the

12  industry and in that voluntary way, I think that will be

13  extremely powerful if we can get the tons that you need.

14           MR. HOGO:  If I may just add one comment, Madam

15  Chair, relative to Ms. Berg's comment.

16           Yes, the voluntary portion -- we have to go out

17  and solicit to get fleets to submit.  But we believe the

18  mandatory part is needed because we really don't know what

19  the fleet makeups are.  And having a compliance plan

20  actually gives us ability to see how many engines can come

21  in and we can look at the cost issue.  We're actually

22  doing a socioeconomic assessment of the SOON program.  And

23  our initial findings are that over the life of the

24  off-road regulation, there's actually savings when a fleet

25  goes in the SOON program the way that staff has set up the

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 1  current version of the regulation.  So there is --

 2           BOARD MEMBER BERG:  Thank you.  We'll look

 3  forward to that information.  Thank you very much.

 4           CHAIRPERSON NICHOLS:  All right.  And since there

 5  is no further business to come before the Board this

 6  evening, I will declare us adjourned at this time.

 7           Thank you, everybody.

 8           (Thereupon the California Air Resources Board

 9           adjourned at 7:18 p.m.)

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 1                    CERTIFICATE OF REPORTER

 2           I, TIFFANY C. KRAFT, a Certified Shorthand

 3  Reporter of the State of California, and Registered

 4  Professional Reporter, do hereby certify:

 5           That I am a disinterested person herein; that the

 6  foregoing hearing was reported in shorthand by me,

 7  Tiffany C. Kraft, a Certified Shorthand Reporter of the

 8  State of California, and thereafter transcribed into

 9  typewriting.

10           I further certify that I am not of counsel or

11  attorney for any of the parties to said hearing nor in any

12  way interested in the outcome of said hearing.

13           IN WITNESS WHEREOF, I have hereunto set my hand

14  this 14th day of April, 2008.

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23                             TIFFANY C. KRAFT, CSR, RPR

24                             Certified Shorthand Reporter

25                             License No. 12277

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